This report pivots around the thesis that the retail sector can use its strategic positioning to have an effective influence on suppliers and consumers, making all phases of the product value chain more sustainable. An IE Foundation's project, under the direction of Alfonso Gadea, with the collaboration of Ernst & Young.
1. IE FOUNDATION ADVANCED SERIES ON PROBLEM DRIVEN-RESEARCH
advanced seriesFoundation
the driving force behind
the shift towards sustainable
production and consumption
CONSUMER GOODS & RETAIL 1
PROBLEM
DRIVEN
RESEARCH
foundation
2013 No. 01
The retail sector:
3. foundation
Dear friends:
One of IE Business School’s goals is to be an international
center of excellence for research in all areas of manage-
ment.We pursue this goal in close collaboration with the
IE Foundation and the recently established IE University.
I would like to present a new initiative of the IE Founda-
tion and IE Business School. We hope it will provide an
innovative way to share the results of the joint work of
our scholars and partner organizations.
The initiative,“IE Foundation Advanced Series on Problem
Driven Research”,aims to provide support to organizations facing the new economic struc-
ture, featuring unique market rules. Recognizing the importance of retailing for assessing
the current situation and the social expectations,we have chosen the“Consumer Goods &
Retail” series as our maiden work.
The IE Business School seeks to create an environment where we can develop the best talent,
while at the IE Foundation we seek to close the loop between the school and businesses by
fostering sustainable relationships through the organization.
We are confident that this initiative will meet the challenge and offer a new perspective
on the issues.
CONSUMER GOODS & RETAIL 3
Marco Trombetta
Vice-dean of Research at IE Business School
Vice-dean of Coordination and Research, IE University
Greetings
5. 02
01
02
03
04
05
06
07
CONSUMER GOODS & RETAIL 5
Research team
Greetings IE Foundation
Greetings Ernst & Young
Executive summary
Introduction
Design and manufacturing
2.1 Banned substances
2.2 Life cycle and carbon footprint analysis
2.3 Supply chain transparency
Packaging
3.1 Involvement of producers and consumers
3.2 Direct reduction of packaging at retail establishments
3.3 Reduction of packaging for transportation
Transportation
4.1 Route optimization
4.2 Efficient transportation
4.3 Alternative fuels
Consumption
5.1 Influencing consumer choice
5.2 Information to foster sustainable use
5.3 Minimization of waste, reutilization, and recycling
Opportunities and challenges
References
6. Professor Carillo-Hermosilla is currently the tenured head
of the Business Science Faculty at Alcala University (Ma-
drid). Before that, he was the Director of Economic Envi-
ronment of Business department at IE Business School, a
Fellow at the Jean Monnet Center for European Studies at
IE University,aVisiting Fellow at Cambridge University and
an Independent Expert assisting the European Commis-
sion in the evaluation of proposals for FP7Theme 6 - Envi-
ronment (including climate change).He has spent the last
few years researching sustainable technological change,
new management models, and the policies that provi-
de an innovative response to tackling the environmental
challenge.His achievements in this field are expounded in
numerous papers and articles on environmental sustaina-
bility and technological change that have been published
in international scientific journals and books. In addition,
he contributes regularly to the leading media publications
and gives frequent talks on the economy,business,and the
environment.Professor Carrillo-Hermosilla holds a PhD in
Economics from Alcala University (Madrid) and an MBA
(with Honors) from IE Business School.
IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
Javier Carrillo-Hermosilla
Associate fellow at IE Foundation
and Professor at Alcala University
Research
team
7. Professor del Río is a tenured researcher at the Environmental
Economics Group of the CSIC’s Institute of Public Policy and
Goods. He holds a PhD in Economic and Business Sciences
from Autonomous University of Madrid (2002).With 13 years’
experience lecturing on environmental economics and eco-
nometrics, Pablo has served as professor at the University
of Castilla-La Mancha and vice-dean of foreign relations in
this university’s legal and social sciences faculty in Toledo.
He is specialized in environmental economics, innovation
economics,and energy economics,having been published on
more than 70 occasions in first-class international journals.
Professor del Río has been participating in joint European
research initiatives for more than 15 years.
CEO of Impetu Solutions, Prof. Könnölä is a well-regarded
and renowned consultant specialized in strategic ma-
nagement of innovation and sustainability. He has held
several research and policy advisory positions at the Ins-
titute for Prospective Technological Studies at the Euro-
pean Commission’s Joint Research Center, VTT Technical
Research Center of Finland, Helsinki University of Techno-
logy, IE Business School, and Gaia Group Ltd. He is also an
associate professor of industrial and technology policy at
ICAI,PontificiaComillasUniversity.ProfessorKönnöläholds
aDoctorofScienceandLicentiateofScienceinTechnology
from Helsinki’s University of Technology (Aalto University
since 2010),as well as a Master’s degree in Environmental
Economics, from Helsinki University. All of this has made
him an expert in technology forecasting and strategy, in-
novationmanagement andpolicy,emerging technologies,
manufacturing and industrial policy, environmental and
energy management and policy and decision-making su-
pport systems. He is a frequent speaker at international
conferences and symposiums and contributor to several
scientific publishers.
CONSUMER GOODS & RETAIL 7
Pablo del Río González
Associate fellow at IE Foundation
and tenured scientist at CSIC).
Totti Könnölä
CEO of Impetu Solutions and Associate Professor
at IE Business School (Operations Management)
8. foundation
Rafael Puyol
Vice-president
IE Foundation
Margarita Velásquez
General Director
IE Foundation
Among its primary activities,IE Foundation supports the research and the knowledge sharing endeavors of IE Business
School’s professors. Through its initiatives IE Foundation contributes to the positioning of IE Bvusiness School as
a center of excellence for innovation, and for the creation of knowledge targeted at its productive environment.
The IE Foundation aims to create strong ties and alliances with prestigious,public and private,institutions,particularly
those in the business domain that can help propel our researchers’ initiatives. As an institution that pursues
excellence,research activities are driven by academic rigor and the utilitarian nature seeking to create knowledge.
We aim to push innovation and competitiveness to provide answers to the challenges and needs of society.
This publication is part of the IE Foundation’s collection on Consumer Goods and Retail,developed in collaboration
with Ernst & Young.We would like to extend our gratitude to them for their commitment and their vast experience
on this matter.
The collection has been designed with the purpose of analyzing the key aspects of the industry through a practice-
driven, up to date perspective on key aspects of the industry such as Sustainability, Information Security, Pricing,
and Profit Protection. We are in the midst of a major change in the retail industry. The challenge many Spanish
organizations face,is being at the forefront of such change and benchmarking best practices in the global market.
The IE Foundation looks forward to helping organizations in this process.
We hope that this publication will be of interest to you, and we appreciate your support.
IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
9. José Luis Ruíz Expósito
Partner and Head of Consumer
Goods & Retail
Manuel Fernández
Business Development Director,
Consumer Goods & Retail
Consumer Products and Retail companies are developing their business in a much more
complex and volatile environment than they have in the past. In this environment,
companies’ actions focus on transforming their business processes and protecting their
operational margins.
In its commitment to innovation and value creation,Ernst & Young has propelled research
projects on the issues that will help companies deal with today’s industry challenges.
Our research takes into account different actions regarding price dynamics from a brand
differentiation perspective.Secondly,we take on the negative economic effect of shrinkage
with an analytical approach,to identify its root causes and suggest corrective actions for its
mitigation (profit protection).We also seek ways to preserve the information security of an
industry that operates,with an increasing frequency,in mobile scenarios and technologies.
Finally, we propose the adoption of a business commitment perspective, betting on
sustainable initiatives from retailers that take into account manufacturers and consumers.
These four areas are experiencing a large change in process. Ernst & Young and the IE
Foundation are approaching these challenges from an innovative perspective with the
intention of putting them into practice and creating value for the business environment.
CONSUMER GOODS & RETAIL 9
10. Executive summary
IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
THE RETAIL SECTOR:THE DRIVING FORCE BEHIND THE
SHIFT TOWARDS SUSTAINABLE PRODUCTION AND
CONSUMPTION
Design and manufacturing phase
Challenges and opportunities
Burgeoning information demands by regulators, consumers, and investors
about retailers’ products and how they are made means that product design
will increasingly factor in multiple environmental considerations as well as
traditional utility, performance, and price-driven attributes.
Relations between retailers and suppliers that are based on trust and a joint
sustainability effort are paving the way for more open and unguarded exchange
of information between the two parties, as well as with governments, non-
profit entities, and academic institutions.
Transparency levels in consumer product supply chains are set to continue to
increase swiftly, injecting visibility into the working conditions, human rights,
and environmental ramifications of product manufacture and distribution.
What others are doing and what your company can do
While numerous retailers use banned substance lists, some have gone further
by engaging themselves in detailed analysis of the life cycles of their products
and services and collaborating closely with all stakeholders to boost supply
chain transparency and shrink their overall environmental footprints.
Packaging phase
Challenges and opportunities
Pared-back packaging can translate into significant
cost savings and a better environmental record by
using fewer materials and streamlining logistics and
transportation operations.
Beyond reducing private label product packaging
and the amount of packaging used in retail
establishments, the real challenge lies with
engaging other players in the value chain, most
importantly suppliers and consumers.
What others are doing and what your
company can do
It is by no means uncommon for retailers to act
directly to reduce their own products’ packaging,
redesigning containers, how products fit and stack
together and how the waste is compacted or
concentrated. It is more complex, albeit possible,
to lighten up this end of the supply chain when
it comes to third-party products and/or when
producers and consumers need to be involved in
designing more efficient packaging solutions.
11. CONSUMER GOODS & RETAIL 11
This report pivots around the thesis that the retail sector
can use its strategic positioning to have a real and effective
influence on suppliers and consumers,making all phases of the
product value chain – design and manufacturing, packaging,
transportation, and consumption – more sustainable. The
closer the value chain gets to a closed-cycle, in which waste
is transformed into inputs for new products, the more
sustainable it will become. The purpose of this study is also
to provide a snapshot of the diverse nature of unfolding
sector practices, showcasing various retailers’ unique ways
of proactively tackling the issue at each stage of the process.
While these efforts do not always produce meaningful returns
in the short turn, by championing improvements in their
environment these retailers will unquestionably create value
and buy business sustainability medium and longer term,
while setting themselves apart from their competitors and
positioning themselves to better handle the growing clamor
from regulators,consumers,and investors for more information
and stronger environmental pledges.
Transportation phase
Challenges and opportunities
One of the greatest obstacles to maximizing
transportation efficiency is the lack of commercially
available, low carbon technology. However, natural gas
and electric-powered trucks are already becoming popular
and will become even more so as their prices fall.
In the long term, achieving carbon neutral shipping will
likely be the goal of many retailers. Just as the automobile
industry is catering to the demand for more fuel-efficient
vehicles, the trucking industry will continue to do the
same. By embracing smarter transportation, retailers can
both reduce unnecessary costs and shrink their carbon
footprint.
What others are doing and what your company can do
Retailers can help expand the availability of these
technologies by pilot testing low carbon transportation
methods and expanding their pilots whenever financially
feasible. In the meantime, however, retailers can optimize
shipping by using efficient packing and distribution processes
and currently available transportation technologies. Many
retailers have already incorporated these approaches into
their operations, which are rapidly becoming business as
usual.
Consumption phase
Challenges and opportunities
Consumer bias towards more environmentally-friendly products
suggests that manufacturers and retailers that manage to adapt to
emerging environmental challenges have much to gain. By stressing
the environmentally-friendly attributes of their products, retailers can
gain a competitive edge, particularly if they manage to translate these
attributes into cost savings for the end consumer.
And by stressing the cost savings accruing to consumers throughout
product life cycles, retailers stand to overcome the barrier implied by the
higher price of these products, ultimately benefitting their profitability.
Designing more environmentally-friendly products may require supplier
engagement.
Retailers can also influence how their products are disposed of after
consumption or at the end of their useful lives.
What others are doing and what your company can do
Retailers can shape consumer choice, nudging buyers towards more
sustainable products directly, by modifying the products they sell and
how they promote them, or indirectly, by providing information or
financial incentives.
Consumer information can also be used to reduce the environmental
ramifications of everyday product-use as product use tends to be one
of the phases with greater environmental consequences. Encouraging
the reutilization of containers can result in significant cost savings for
retailers in respect of products for which waste is mainly packaging-
derived.
12. IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
1.Working between
suppliers and
consumers
Introduction
Environmental protection requires reducing the environmental
consequencesofproductionandconsumptionthroughout apro-
duct or service’s entire life cycle,from selection of raw materials
to its end-of-life disposal or reutilization,having been packaged,
transported, used and consumed in the meantime. In fact, pro-
ducts in the wide sense (tangible products, services, and packa-
ging)accountforoverhalfofhouseholds’environmentalimpacts1
.
It isthereforevitaltorefocusproductionandconsumptionactivi-
ties on more environmentally-friendly products.The retail sector
can play a leading role to this end.
As expounded throughout this report, the retail sector can be
viewed as a‘hinge’sector,pivotal in reducing the environmental
impacts of the production and consumption processes precisely
because of its positioning at the intersecting point of these
processes(Chart 1).Thesectoristhereforestrategicallypositioned
to influence suppliers (upstream) and consumers (downstream)
throughout the product value chain.Moreover,as is well known,
thesectorcanhaveasignificantenvironmentalimpactasaresult
of its own warehouse operations and logistics (transportation)
activities.
The variety of direct environmental impacts (deriving from
everyday operations) and indirect impacts (deriving from the
production and consumption processes triggered, respectively,
by their suppliers and consumers) suggests that the range of
measures available for reducing their overall environmental
impact is theoretically broad. That being said, the fundamental
role of the retail sector should, without a doubt, be to influence
other stakeholders (suppliers and consumers) rather than being
limitedtoreducingthedirectenvironmentalimpactsoftheirstore
operations.This is a considerable challenge for the sector to the
extent thatitimpliespursuinginitiativesthatmayunderminethe
delivery of profit targets in the short term; however, this report
showcases several examples of how a proactive environmental
approach also guarantees value creation and sustainable
profitabilityforretailersbyenablingthemtoset themselvesapart
from theircompetitorsandposition themselves tobetterhandle
thegrowingclamorfromregulators,consumers,andinvestorsfor
more information and stronger environmental pledges.
13. CONSUMER GOODS & RETAIL 13
Retail
Production
Consumption
Figure 1:the retail sector:the driving
force behind the shift in production and
consumption
As highlighted by the case studies analyzed in this report,
although the sector’s ability to influence these other players
is undeniable, the strategies pursued need to factor in
certain considerations. And although companies in general
and retailers in particular are increasingly committed to
the environment, there is significant disparity in how these
businesses are adopting sustainable practices and products.
The purpose of this report is also to provide a snapshot of
this diversity, showcasing various retailers’ unique ways of
proactively tackling the issue throughout every phase of the
product-service value chain.The closer the value chain gets to
a closed-cycle, in which waste is transformed into inputs for
new products, the more sustainable it will become (Chart 2).
Figure 2:retail sector channels of influence over sustainability in
the product-service value chain
Influencing consumer choice
Information to foster
sustainable use
Minimization of waste,
reutilization and recycling
Lists of banned substances
Life cycle and carbon
footprint analysis
Supply chain transparency
Route optimization
Efficient transportation
Alternative fuels
Involvement of producers
and consumers
Reduction of packaging at
retail establishments
Reduction of packaging
for transportationPACKAGING
DESIGN AND
MANUFACTURING
CONSUMPTION
TRANSPORTATION
14. Design is probably the phase that most significantly shapes a product’s environmental
impact throughout its entire life cycle.While the actions taken by retailers to purchase
environmentally-friendly products and services for their own use2
can reduce their
carbon footprints,the sector’s contribution can be considerably amplified if it also
chooses to try to reduce the environmental impact of the products stocked on
theirshelves.Morespecifically,retailerscanincludeenvironmentalcriteriawhen
selecting which products to sell to their customers among those offered by
the various brand suppliers (choice-editing), even though their ability to
influencehow theseproductsaredesignedmaybeslimcompared to their
influenceoverprivatelabelproduct design.Against thisbackdrop,several
retailers are introducing sustainability criteria to
private label product design, in response for
customer demands for attributes such
as organic or sustainable sources,
high recycling content or energy
efficiency. These initiatives have
tended to focus on the eco-
design of private label packaging
and containers (Section 3)
whereas examples of action
taken to foster the eco-design of
the products themselves are far
fewer.
Desig
manufaSupply chain
transparency
IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
2. Design and
manufacturing
A variety of guidelines specifically tackle the environmental
aspects of product design. The ISO 14006:2011 standard,
for example, provides guidelines to assist organizations in
establishing,documenting,implementing,maintaining and
continually improving their management of eco-design as
part of an environmental management system (EMS)3.
Regulation
15. Beyond private label products and their packaging, the real challenge facing retailers
lies with their ability to have an impact upstream, to the point of influencing producers
at the earliest stages of product design. However, the lengthening, complexity and
globalization of today’s supplier chains is making it increasingly harder to trace and
control the environmental commitments of all of participants. Nevertheless, as is
shown later on in this report, we can find examples of retailers that are fostering
greater transparency and responsibility on the part of their suppliers.To this end
they are developing technology, processes and systems designed to promote
continual supply chain improvement and innovation, particularly in relation to
product design and manufacturing.
While numerous retailers use banned substance lists
(‘black lists’),some have gone further by engaging
themselves in detailed analysis of the life cycles
of their products and services and collaborating
closely with all stakeholders to boost supply
chain transparency and shrink their overall
environmental footprints (Chart 3).
gn and
acturing
Lists of
banned
substances
Life cycle and carbon
footprint analysis
CONSUMER GOODS & RETAIL 15
Meanwhile, in 2005 the European Commission established
the European Platform on Life Cycle Assessment (LCA)4
to
promote LCA data consistency,quality control and availability;
in 2010,it officially launched the International Reference Life
Cycle Data System (ILCD), which, among other documents,
includes a handbook with life cycle assessment methodology
recommendations.The importance of life cycle thinking and
the corresponding analysis has since been further boosted by
the Action Plan for Sustainable Consumption and Production
(SCP)5
. In addition, the reference guide for life cycle analysis
has been homogenized under the ISO 14040 standard series.
CHART 3: RETAIL SECTOR CHANNELS OF INFLUENCE
OVER THE DESIGN AND MANUFACTURING PHASE
16. Lists of banned substan-
ces ensure that no hazardo-
us chemical components are used
in the production of goods6
. Retailers can also
make use of what are known as ‘black lists’ to
ban the use of certain substances in their products
(e.g.,hazardous chemicals).Several retailers (C&A,
H&M, IKEA, Kesko, METRO and Tesco) implement
what could be called selective eco-design, whe-
re, for example, certain hazardous chemicals are
black-listed and cannot be included in products’
components (Case Study 1).To cite a few examples
of this‘choice-editing’:Mercadona has banned the
use of PVC in containers and packaging;Kesko has
stopped selling bluefin tuna (an endangered spe-
cies); Carrefour has reduced the sales of bluefin
tuna in its French stores, and has completely sto-
pped it in its Italian and Spanish stores; Carrefour
has also stopped sales of non-certified tropical
wood and since 1996, all retailer and own-brand
products are labeled as not containing GMOs.
Banned
substances
IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
2.1
17. Case study 1. H&M’s ‘black list’
The initiative
H&M ensures that its substance restrictions are understood and applied throughout its supply chain. H&M
has established a list of more than 250 chemicals which its suppliers are forbidden to use, applying the most
stringent criteria in force in any of its operating markets to all of the countries where its sells its clothing.The
retailer has also banned voluntarily certain chemical substances that are not banned by law (e.g.triclosan,PVC,
Kat ionicsurfactants, while phthalates are not only prohibited for children but also for adults).
Benefits
H&M published its first Chemical Restriction list in 1995. Since then, the company has achieved several miles-
tones (such as the phasing out of PVC from all its products in 2002 and the banning of the use of Nonylphenol
ethoxylates in 2009),positioning the company as the pioneering apparel retailer in this field.H&M’s know-how
and position in this area have ensured its regular presence at the main regulatory and business forums,giving
it a say in how business practices unfold in the future (for example, it has been collaborating with the UN on
the development of a global practice for spreading information on chemicals in products since 2008 and,since
2010,it has been participating in the Sustainable Apparel Coalition with the goal of developing a universal index
to measure the environmental and social performance of apparel products).
Source: H&M’s website: http://about.hm.com/content/hm/AboutSection/sv/About/Sustainability/Commitments/Use-Resources-Responsibly/Chemicals/Zero-
Discharge.html
Background
H&M has been working to reduce the use and impact of hazardous chemicals using an approach based on the
Precautionary Principle since 1995.
CONSUMER GOODS & RETAIL 17
18. IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
Unquestionably, the life cycle analysis
(LCA) concept transcends the scope of
this section as it can be viewed as a tool
that transects every phase of the value chain.
However, it is addressed in this section based
on the understanding that its overriding utility is
to gather information for the continual improvement and
re-design of products and services.
LCA enables assessment of a product’s environmental impacts from
its design to use and disposal and identification of the key aspects
or‘hot spots’that imply the greatest scope for improvement. Some
retailers are looking beyond specific product lines, integrating
sustainability into all areas of their business activities. IKEA, for
example, has launched an environmental design initiative known
as the ‘e-wheel’ in order to understand and monitor the impact of
its products throughout their entire life cycles (Case Study 2). Some
supermarkets such as Carrefour use LCA results to identify ‘hot
spots’ for a given product category and integrate environmental
considerations into product specifications.
The eco-design of products such as textiles or wooden furniture
is slightly different from the eco-design of other products. Their
worldwide presence facilitates the transfer of knowledge from
one country to another or the organization of schemes, decreasing
investment costs for the retail chains committing to participate.
Even if these retailers have to deal with complex international supply
chains, a systematic product eco-design policy is less difficult to
implement because of the reduced number of materials involved
(textiles,wood) and the fact that product functionality is less diverse
than for generalist retailers.
Life cycle and
carbon footprint
analysis
2.2
19. EKTORP
CONSUMER GOODS & RETAIL 19
Background
Retailer product designers, developers and technicians face the challenge of factoring in the product’s environmental
impacts throughout its life cycle as well as safety and quality considerations.IKEA has developed tools for systematically
incorporating these criteria into its new product design and development processes.
Benefits
The e-wheel and the eight rules give IKEA’s design and
development team a useful guide for creating more
environmentally-friendlyproducts,suchas theEKTORP
sofa which customers can now assemble at home.The
self-assembly option allows IKEA cut merchandise
handling time by 50%, emit 4,700 fewer tonnes of
greenhouse gases,reduce required warehousing space
by 370,000m2 and store display/storage space by half,
while saving €8,300,000 a year in road transportation
by needing 6,866 fewer trucks.
Rule 1: Establishment of objectives and compliance with sustainability
requirements.Identification of sustainability objectives from the outset.
Rule 2: Creation of more from less. Achievement of the same utility,
quality and design using fewer raw materials.
Rule 3: Use of environmentally-friendly materials. Use of renewable or
recyclable materials whenever possible.
Rule 4: Optimization of efficient production. Contribution to supply
chain sustainability.
Rule 5: Smart packaging. Designer products can be packaged and dis-
tributed efficiently.
Rule 6: Creation of products with a long useful life. Helping customers
to use products for longer without renouncing quality.
Rule 7: Products that enable smart use. Helping customers to reduce
their energy and water usage and their waste generation.
Rule 8: Design for recycling. Design products that facilitate customer
recycling.
The initiatives
IKEA uses the ‘e-wheel’ method to learn
about and assess the environmental
impact of its products. This method
analyzes various points of control: raw
materials,manufacturing,product use and
end of life. The company has specified the
implications of the e-wheel for its designers
by articulating eight rules to be followed
when designing new products or updating
existing products:
Case 2. LCA in product design at IKEA
20. Carbon footprint analysis can be viewed as an extension of the above approach,albeit focused specifically on greenhouse
gas (GHG) emissions.The use of fossil fuels in business operations and the rest of the value chain gives rise to emissions.
The ability to quantify and reduce these emissions can lead to numerous benefits. Determining the carbon footprint
of its supply chain is one of the more effective steps a retailer can take in developing its environmental sustainability
strategy. However, this is a complex process requiring an abundance of information and significant cross-departmental
and supplier/partner communication and coordination skills.The effort is usually profitable for all parties as it tends to
highlight numerous opportunities for making operations more efficient (Case Study 3).
IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
21. Case Study 3
Walmart’s strategy for reducing supply chain GHG emissions
Background
Walmart estimates that over 90% of its GHG emissions are ge-
nerated indirectly,with the remainder attributable directly to its
own operations.The retailer is helping its suppliers reduce their
energy use,costs and emissions through a partnership with the
Environmental Defense Fund (EDF), ClearCarbon, the Carbon
Disclosure Project and the Applied Sustainability Center (ASC)
at the University of Arkansas.
Source:-
-“http://www.rila.org/sustainability/sustreport/sustainability-report-landing-
page/”http://www.rila.org/sustainability/sustreport/sustainability-report-landing-
page/pages/default.aspx
-http://www.greenbiz.œm/biog/20u/06/06/how-walmart-using-its-sustainability-
metrics-drive-productivity?utm_source=E-News+from+GreenBiz&utm_
campaign=6d6a67bdb8-GreenBuzz-2012-06-07&utm_medium=email
-“http://coepoeatp.walmaet.com/global-epsponsibility/pnvieonmpnt-
sustainability/”http://corporate.walmart.com/global-responsibility/environment-
sustainability/ global-responsibility-report
-http://HYPERLINK “http://www.en”www.environmentalleader.com/2010/02/26/
walmart-pledges-to-cut-supply- chain-emissions-20m-metric-tons-by-2015/
-“http://www.pCfoeg/npws/walmaet-announcps-goal-pliminatp-20-million-mpteic-
”http://www.edf.org/news/walmart-announces-goal-eliminate-20-million-metric-
tons-greenhouse-gas-emissions-global-supply-
The initiative
Walmart’s Supplier Energy Efficiency Project (SEEP) is aimed at
eliminating emissions from the company’s supply chain,where
the retailer oversees energy audits and retrofits at its suppliers’
factories.
Walmart’s program to reduce GHGs has three main compo-
nents. Firstly, it has reviewed its main product categories by
volume with a view to identifying the areas of its global supply
chain that have the greatest opportunity for reductions,paving
the way for more efficient resource usage, coupled with the
highest possible impact.The actionable sustainability systems
designed can be transferred to different kinds of suppliers in
different countries. Secondly,Walmart is looking for innovative
approaches in other organizations,such as NGOs and consultan-
cies.The sustainability network built byWalmart has brought it
leadership,expert know-how and other resources that it would
not have been able to tap on its own. Lastly, and in parallel, the
company is educating its procurement officers on its emission-
cutting targets and strategies,so that they can,in turn,educate
their suppliers.
Benefits
In February 2010,Walmart announced its goal of eliminating
20 million metric tonnes of GHG emissions from its global
supply chain by 2015.This target was the result of a joint re-
search project with NGOs.The commitment was set at 150%
of the company’s estimated global carbon footprint growth
over the next five years,the ultimate target being to engage
its suppliers and customers in a constructive dialogue about
sustainability.Under the program,Walmart’s suppliers have
reduced GHG emissions by 3,300 metric tonnes and saved
$200,000 in energy costs.
CONSUMER GOODS & RETAIL 21
22. IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
The new relation-
ship being forged
between the re-
tailer and its su-
ppliers is marked by
higher levels of colla-
boration and engagement
in terms of supplier practices,
including eco-efficiency and working conditions designed
to foster ongoing improvement and risk mitigation for
both parties.Together, these stakeholders are evaluating,
reporting on, verifying and tackling the social and envi-
ronmental impacts of their supply chains.By way of exam-
ple, Walmart’s Supplier Energy Efficiency Program (SEEP)
encompasses energy audits and financing for suppliers
investing to upgrade their facilities.
Reporting on the impacts, objectives, and progress made
in this field should be placed at the heart of any retailer’s
sustainability strategy. Such a reporting effort informs
stakeholders about retailers’ sustainability drives and
allows public scrutiny. Metric-based public targets shed
light on long-term targets,demonstrating to stakeholders
that acrediblecommitment hasbeenmade tosupplychain
sustainability.
Because supply chain action involves numerous parties
and various levels of control, collaboration is vital.
Best Buy, Gap Inc., JC Penney, Safeway, Target, REI, VF
Corporation, Walmart and many others have concluded
that participation in collaborative taskforces is essential
to developing comprehensive and consistent industry
and product standards. These taskforces bring together
companies, governments, non-profit organizations and
academic institutions for the purpose of exchanging
supply chain sustainability know-how and resources7.
In order to improve the quality and transparency of the
information compiled, some companies have turned to
audit and certification firms that verify the data gathered
(Case Study 4).
Supply chain
transparency
2.3
23. CONSUMER GOODS & RETAIL 23
Background
Over the past two decades illycaffè has per-
fected a system of direct relationships with its
suppliers,based on three main pillars:selecting
the best growers in coffee-producing countries;
transferring to these growers, through the
company’s Università del Caffè and the daily
field work of specialized agronomists, com-
prehensive knowledge to produce coffee
meeting illy’s high quality standards;
and purchasing the best production
directly from growers,paying them
a premium over the going market
price to reward quality achieved,
and incentivize ongoing impro-
vement.
The initiatives
DNV, an international product and
process certification company, in part
modeled its new certification standard
on the illycaffè supply chain model. The
standard developed by DNV is innovative be-
cause it marks the passage from the certifica-
tion of an organization’s supply chain to the
certification of an organization’s ability to crea-
te value that benefits everyone involved. The
illycaffè model is innovative in assigning critical
roles to quality and value creation.
During the year that the certification process
lasted for illycaffè, DNV performed its audits
and the company made efforts to perfect its
internal processes in order to meet the requi-
sites. All of illycaffè’s functions were involved,
from the board of directors to management and
operational personnel.
Case Study 4.
Illycaffè:
development of a
carbon footprint
analysis framework
under the umbrella
of its Responsible
Supply Chain
Process initiative
Benefits
In March 2011 illycaffè became the world’s first company
to receive a Det NorskeVeritas (DNV) Responsible Supply
Chain Process certification, attesting to the company’s
long-running sustainable approach to production and its
relations with stakeholders throughout the production
chain,particularly with green coffee suppliers.The DNV
Responsible Supply Chain Process standard is designed
for application to any kind of supply of raw materials.
Source: Press release, March 2011.
24. IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
Packaging is a crucial part of the product supply chain
in logistics and sales terms but also in environmental
terms. Environmentally unfriendly packaging increases
transportation intensity,floor space usage (warehousing)
and end waste per unit of value. At the same time,
packaging is by its very nature the most visible aspect
of a product: its environmental impacts are readily
understood by consumers,the media and environmental
activists, which is why packaging is often the focus of
these groups’ demands for greater sustainability. As
a result, packaging and its management present a
wonderful opportunity for adding environmental (and
economic) value to a given product.
The environmental impact of packaging waste
is particularly important to consumers. A 2009
Eurobarometer survey showed that 30% of EU citizens
consider that minimizing waste and recycling would
be actions having the greatest impact on solving
environmental problems. Indeed, 3% of all waste
generated in the EU in 2008 was packaging waste,
generated by companies and consumers8
.
Optimization efforts at this point of the supply chain
require assessment of existing packaging processes
and designs, analysis of alternatives and introduction
of the optimal solutions. Once again, this process
crucially requires the retailer to involve its producers
and consumers9 in designing more efficient packaging
solutions. In parallel, retailers can take direct action,
without having to extensively involve producers and
consumers,to reduce store packaging.A third alternative,
dealt with in Section 4,relates to reducing transportation
packaging (Chart 4).
3. Packaging
In the European Union, all packaging must meet the
Essential Requirements stipulated in Annex II of European
Directive 94/62/CE on packaging and packaging waste
(the PPWD)10
, as amended subsequently by Directives
2004/12/EC, 2005/20/EC and Regulation No 219/2009
and transposed into Spanish law by Law 11/1997 of April
24,1997,on packaging and packaging waste,and enacting
Royal Decree 782/1998. The requirements laid down
Regulation
25. CONSUMER GOODS & RETAIL 25
in Directive 94/62/EC specify that packaging weight and
volumes are to be limited to the strict minimum required to
ensure the necessary level of safety,hygiene,and acceptance
for the packed product and for the consumer.This legislation
further stipulates the minimization of noxious and other
hazardous substances and materials as constituents of the
packaging material or any of its components. Moreover,
packaging must be designed,produced,and commercialized
in such a way as to permit its reuse or recovery, including
recycling.Companies are responsible for demonstrating that
their product packaging complies with these requirements,
to which end they may use the standards published by the
European Committee for Standardization in 2005 (CEN
Standards for Packaging and Environment11
) or equivalent
national standards12
.
Chart 4:Retail sector channels of
influence over packaging
Packaging
Reduction of
packaging at retail
establishments s
Reduction of
packaging for
transportation
Involvement of
producers and
consumers
27. CONSUMER GOODS & RETAIL 27
Generally speaking, a certain level of
collaboration among all the parties involved
is essential to achieving more efficient
packaging. Against this backdrop, there
are multiple voluntary initiatives aimed
at channeling retailer-supplier-consumer
collaboration,such as the Global Protocol on
Packaging Sustainability13
, the Sustainable
Packaging Coalition14
, the Global Packaging
Project15
and the European Organization for
Packaging and the Environment16
.
Producers also have a direct economic
incentive to reduce packaging as less
packaging means lower costs, mainly via
savings in materials and transportation
costs. However, although reduced volumes
are a prerequisite for minimizing the
environmental impact of packaging, it is
important to remember that excessive
packaging elimination can lead to
product spoiling or even loss, with adverse
environmental consequences that may even
wipe out the desired gains. It is therefore
necessary to strike an optimal balance in
environmental terms when reducing the
amount of materials used for packaging
purposes17
. Some retailers, such as Kesko,
have developed guidelines for their suppliers
for eco-designing products in order to
minimize the environmental impacts of their
packaging.
At the consumer end of the spectrum,
environmental protection arguments can
prove effective but should be accompanied
by adequate information. There are
cases, however, that show that economic
arguments can also be powerful in this
respect. Puma, for example, has replaced
its shoe boxes with bags that can be reused
by consumers, providing shoppers with a
tangible saving. Consumers therefore need
to be engaged and educated to (i) play a
leading role by choosing products with less
packaging, to the extent possible; (ii) use
packaging appropriately; and (iii) to help
gather up used packaging for subsequent
recycling18
.
28. IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
Case Study 5.
EROSKI: application
of the EE7+
end-to-end
packaging
eco-design
methodology
In parallel,retailers can take action,without
having to extensively involve producers
and consumers, to directly reduce the
environmental footprint of its own
packaging by paring back store packaging.
Indeed, significant opportunities exist in
the development of more efficient white
label packaging particularly in relation to
fresh products, for instance by reducing
the weight of containers, by optimizing
packaging dimensions relative to net
product weight and by choosing recyclable
materials (Case Study 5).
3.2 Reduction of
packaging at retail
establishments
29. CONSUMER GOODS & RETAIL 29
Background
The food industry operates in a highly competitive and increasingly global market and is being forced to seek new ways to
reduce production costs while defending profit margins.At the same time,sustainability awareness and demands on the part
of consumers, industry, and society in general are growing.
Sources: HYPERLINK “http://www.eroski.es/es/conoce-eroski/memoria-eroski-2010/implicados-con-nuestro-entorno/veteranos-en-responsabilidad-social-corporativa/”http://www.
eroski.es/es/conoce-eroski/memoria-eroski-2010/implicados-con-nuestro-entorno/veteranos-en-responsabilidad-social-corporativa/
European Commission Retail Forum_packaging_issue_paper_p10
http://www.eroski.es/es/conoce-eroski/sala-prensa/notas-de-prensa/eroski-reduce-el-impacto-ambiental-de-envases-y-embalajes-con-apoyo-de-una-aplicacion-informatica-Memoria
EROSKI 2011
Benefits
Eroski reduced carbon dioxide equivalent emissions by 950 tonnes and
achieved significant cost savings by using fewer raw materials.
Some examples:
- EROSKI basic ground and decaf coffee:the box displaying this product
was modified; by going from a double piece of cardboard to a single
piece, the retailer achieved savings of 35% in terms of raw materials
and of 290 grams of carbon dioxide equivalent per unit sold.
- EROSKI puff pastry: the solid bleached board case was replaced by
a flow pack wrapper, resulting in 56 fewer grams of carbon dioxide
equivalent per unit.
- EROSKI disposable gloves:the cardboard box was replaced by a plastic
package, reducing the amount of raw material used by 87%, thereby
saving 41.7 grams of carbon dioxide per unit.
- EROSKI cleaning products: the original raw material was replaced by
sustainable plastic,reducing its environmental impact - by 37.2 grams
of carbon dioxide equivalent per unit -,as a result of the lower weight
of the new packaging as well as the more energy-efficient processing
of the new plastic.
- EROSKI home-style tomato sauce:the amount of glass used in the jar
was reduced,saving 35.8 grams of carbon dioxide equivalent per unit.
The initiative
The project for the enhanced design and
control of private label product packaging was
designed to tackle the dual challenge of reducing
production costs while mitigating environmental
consequencesbyreducingtheweightofpackaging,
eliminating raw materials and replacing certain
materialswithothers.To thisendEroskideveloped
a tailored software application, in cooperation
with AZTI - Tecnalia Technological Centre,
to compare the effect of different
packaging formats in terms of costs
(materials, productive processes,
transportation,end management)
and overall environmental impact
throughout the entire product
life cycle, ultimately generating
solutions. Eroski analyzed the
environmental impact of the
packaging and containers for
almost 100 white label SKUs.
30. IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
Dealt with again in Section 4, smart packing methods improve transportation
efficiency by maximizing product loads per dispatch. Certain retailers appear
particularlykeentostreamlinepackagingvolumes,astheresultingreduction
in weight and dimensions often pays off in terms of material savings and
logistics efficiency. For example, REI redesigned its bike boxes, thereby
reducing packaging by 68% and increasing the number of bikes per
load by 10%.Safeway also re-evaluated their packing methods to have
more products per pallet and pallets per truck,reducing its 2010 carbon
emissions by 9,667 tonnes.IKEA’s championing of its now well-known
flat packaging and other practical packaging solutions, such ideas to
make its products more stackable or making the packaging part of the
product itself,are enabling the retailer to reduce the amount of space needed
to ship its merchandise; this is translating into lower vehicle requirements and
GHG emissions, and saving the company money (Case Study 6).
Case Study 6.
Packaging the lever
for reducing the
group’s environmental
footprint.
Background
In 2011,665 million customers from 26 countries passed through IKEA’s 287 stores,stocked with a portfolio
of 9,500 household products made by 1,026 suppliers in 53 countries.IKEA is trying to cut its transportation-
driven carbon emissions by 20% by 2016.Product design for flat packing is viewed as a powerful lever for
reducing material quantities, transportation-related emissions and waste.
Reduction of
packaging for
transportation
3.3
31. Benefits
- IKEA’s EKTORP sofa is one of its best-selling but also one
of its most voluminous products. The retailer’s product
engineers have managed to develop smart packing criteria
despite the sofa’s rounded arm rests. Today, this sofa is
a flat-packed product that is self-assembled at home,
requiring half the amount of space it used to need. The
benefits of this initiative are outlined in Case Study 2.The
savings have also been passed through to customer prices.
- The KASSETT filing systems are now flat-packed. This
means that five times as many KASSETT products now fit
on a pallet as did before. Transportation GHG emissions
have thereby been slashed by 75%.
- By simply changing how its POEM cutlery is packaged,IKEA
needs 188kg less cardboard per year. Moreover, shoppers
can see the product better which is why package damage
has fallen.
- By changing how its KVARTAL curtain hanging systems
are packaged, IKEA has saved 2,279kg of cardboard per
year, boosting the number of units that fit on each pallet
to 7,840.
- An IKEA employee discovered that ALÄNG lamp packaging
could be reduced by 30% by placing the various parts
differently. The employee made the suggestion to IKEA’s
packaging experts who in turn told the suppliers. Today
24 ALÄNG lamps fit on each pallet (compared to 18
previously).
- In Switzerland IKEA co-workers bring old newspapers into
the stores so that shoppers can use them to wrap glasses
and other fragile items instead of wrapping them in paper.
Sources: IKEA Sustainability Report 2011. The IKEA Group approach to sustainability
(2011). IKEA 2010 Sustainability Report for Spain and Portugal.
CONSUMER GOODS & RETAIL 31
The initiatives
Orientating the entire IKEA value chain towards flat packing
or stackable product solutions, to which end the people
responsible for product design and development have been
anointed to play a key role.
Product Sustainability Scorecard:11 criteria that determine the
sustainability profile of a product throughout its life cycle.IKEA
aims to have 90% of its sales value come from products that are
classified as‘more sustainable’according its scorecard criteria
by 2015.At the start of 2011,200 design and range development
co-workers received training on how to use the web-based
scorecard.As of 2011,products that account for 7% of IKEA sales
value had been evaluated using these criteria and 2% had been
classified as ‘more sustainable’. Regardless of the scorecard
result,IKEA first requires that a product is produced by suppliers
that meet the social and environmental requirements of its
IWAY supplier code of conduct.
Cardboard pallets: designed to optimize loads, minimize
shipping requirements and reduce emissions. They are
recyclable and use very few raw materials. These innovative
pallets fit better than wood pallets in modern trucks and
containers.The recyclable cardboard pallets,which are just 5cm
high, allow IKEA to fit more products per load. New furniture
items are only added to the product portfolio if they can be flat
packed.For instance,IKEA using cardboard pallets till 2016 will
translate into transportation savings of €16 million.
Waste reduction via packaging volume and composition
analysis. Processes for the conversion of waste into new
resources (‘closing material loops’) with a focus on plastic
packaging materials. The targets for 2015: (i) zero waste to
landfill;and (ii) to enable and encourage all customers to reuse
or recycle all IKEA products at end-of-life.
Phasing out of expanded polystyrene (EPS) packaging. EPS is
commonly used as a shock absorber for fragile products. IKEA
plans to phase its use out by 2015.EPS is oil-based and difficult
to recycle in many markets.Instead IKEA will use fibrous shock
absorbers made from recycled paper and cardboard, folded or
molded to suit the product it surrounds (basically the same
solution commonly used for egg cartons).
Product recovery: IKEA stores work consistently to repair
goods with damaged packaging‘as is’in their bargain corners.
Having invested €800,000 in 10 stores in Spain,IKEA recovered
products with a sales value of €1.5 million.
32. IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
4.Transportation
By reaching out to others and introducing operational improvements, retailers
are making their fleets more efficient, thereby further reducing their carbon
footprints. In order to reduce their transport emissions, retailers are striving for
efficiency in three ways (Chart 5):route optimization,technology innovation,and
low-carbon transportation methods.
Chart 5: Retail sector channels of influence over transportation
Alternative
fuels
Efficient
transportation
Traditionally retailers have approached this juncture of the supply chain as a
source of cost-cutting opportunities; naturally, it is also an area for paring back
environmental impacts. Distance, capacity, technology, and route optimization
contribute simultaneously to financial benefits and the sector’s environmental
sustainability. This section focuses on the role of the retail sector in developing
and/or encouraging solutions for the sustainable transportation of consumer
goods.
Route
optimization
33. CONSUMER GOODS & RETAIL 33
The mid-term review of the 2001White paper“European
transport policy in 2010: time to decide”19 stresses
the key role of freight transport logistics in ensuring
sustainable and competitive mobility in Europe.In 2007
the European Commission adopted an Action Plan that
recommends a series of priority initiatives, such as
electronic information on freight, training and quality
indicators, simplification of processes, vehicle sizes
and loading units, urban transport, and long-distance
corridors.
Other standards have been passed with a view to making
distribution processes more efficient, such as Directive
92/106/EC on intermodal transportation, and Directive
96/53/EC, which attempts to improve the efficient
use of available capacity and facilitate the use of the
European Modular System20
.The Renewable Energy and
Fuel Quality Directives, officially adopted in 2009, mark
a milestone in the coherent promotion of fuels capable
of reducing GHG emissions in the transport sector.
Regulation
34. Route optimization involves assessing product transportation
patternsandcombiningrouteswherepossible.Byre-evaluating
its routes, optimizing truck load space and increasing fuel
efficiency, CVS21
eliminated 11,000 routes, saving 1.9 million
liters of fuel.Choosing the appropriate mode of transportation
can also significantly cut down on fuel consumption, costs,
and carbon emissions. Air is the most expensive and carbon-
intensive transportation method, followed by trucking,
and then rail. However, other considerations like speed of
delivery must also be taken in account when determining the
appropriate method of transportation. Retailers are adopting
intermodal transport systems,i.e.,they are combining the use
of road,rail,waterways,and air travel (Case Study 7).However,
the full deployment of intermodal transport is being stymied
by a series of obstacles related to the lack of standardization
across the various countries and operators.
The so-called‘last-mile’continues to be the prerogative of road
transport and, given its local dimension, transport operators
need to respect local legislation regulating access to cities.
In Europe, urban traffic is responsible for around 40% of
GHG emissions and 70% of other noxious emissions from
road transport22
. This issue therefore constitutes an area of
particular sensitivity for European legislators at all levels, so
that growing restrictions on freight transport in urban areas
can be expected.Indeed,a recent European Commission study23
reviews the various member states’practices and policies with
a view to integrating and encouraging best practice in this
field. The 2011 European Transport White Paper24
establishes
the ambitious target of achieving “essentially CO2
-free city
logistics in major urban centers by 2030” by promoting
initiatives such as: minimization of the number of deliveries
and distances; the use of low-emission urban trucks and vans;
the use of intelligent transport systems; and the reduction of
noise in freight transport in urban areas in order to facilitate
night shifts. The PIEK25
project in the Netherlands is a good
example of a best practice in the latter arena; this scheme
allows deliveries at night time so long as peak noise limits are
respected.In practice,greater flexibility on delivery hours could
prove one of the more promising solutions to traffic congestion
and operating efficiency in last-mile distribution.
The other option is to focus on locally-sourced products. GHG
emissons can be reduced by simply cutting the number of miles
travelled.For example,Safeway26
,which has begun stocking the
food produced by hundreds of local farmers all across the US on
its supermarket shelves,views local sourcing as an opportunity
for reducing GHG emissions and supporting regional farming
livelihoods. Whole Foods Market provides small-scale low-
interest loans to local food producers under its Local Producer
Loan Program. In exchange, the loan recipients undertake
to produce high-quality products that meet the company’s
stringent sustainability standards.By means of this micro credit
model, Whole Foods hopes to support local agriculture while
supplying products with a lower environmental impact,thanks
to the attendant reduction in transport needs.27
Route
optimization
4.1
IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
Supplier
warehouse
(Seville)
ACOTRAL Train station Transportat
RENF
200,000tonnesand416trainjourneysperyear
c c c
35. CONSUMER GOODS RETAIL 35
Background
Mercadona,Acotral,and Renfe-Freight have an agreement covering the transportation of non-fresh food and non-food goods
between Seville andTarragona/Valencia.Under the agreement,Renfe is responsible for delivering Mercadona’s goods on time
and carrier Acotral is responsible for logistics management and transport coordination.The agreement has given Mercadona’s
sustainability strategy a boost. Acotral schedules the trucks to pick up the goods at either end at certain times, while Renfe
commits to on-time deliveries.In this manner,Mercadona has engaged one of its logistics providers in improving its efficiency
and sustainability record
Solution
Mercadona’s goods are transported by truck from suppliers in Seville to the train station where the trucks are unloaded and the
train is loaded with the goods.Loading and unloading queues are common but Renfe gives priority to Mercadona’s operations.
Once loaded, the train transports the goods to a train station in Tarragona/Valencia where the truck company (Acotral) picks
up the goods once again and takes them to Mercadona’s distribution center.
Renfe has developed a communications platform to track the goods transported in its trains and Mercadona has integrated
Renfe’s system into its own communication system to ensure visibility through the entire supply chain.
Benefits
Train journeys take place twice a week, in two trains that Renfe has assigned exclusively to Mercadona. A total of 220,000
tonnes of goods are transported per year. In this way, Mercadona manages to deliver its goods on time, at a lower cost and
in a more sustainable manner.This solution has enabled Mercadona to eliminate 9,152 truck journeys and to reduce its GHG
emissions by 12,000 tonnes.
Source:The bestlog project (HYPERLINK“http://www.bestlog.org”www.bestlog.org) initiated by the European Commission. Project Secretariat: Berlin Institute of Technology.
GUEROLA PÉREZ, Sonia: ITENE (acronym in Spanish for the Packaging,Transport, and Logistics Research Center).
Case Study 7
Mercadona: Renfe/Acotral intermodal
logistics platform l
Distribution
center
(Valencia)
ACOTRALTrain stationtion via
FE
10,000 fewer truck journeys a year
c c c
36. IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
Current practices aimed at reducing supply
chain costs and ensuring availability at all
times (i.e. low inventory, smaller and more
frequent deliveries, cross-docking, different
pallet heights) have an impact on truck fill,
on the number of journeys and,ultimately,on
emissions.
Setting transportation efficiency goals,similar
to store energy and landfill waste reduction
goals,can drive innovation and align company
departments. Some retailers own their truc-
king fleets, giving them substantial influence
over their road transport operations.Other re-
tailers outsource this process, which implies
limited influence over transport operations
beyond operator selection considerations.
Retailers can move goods more efficiently by
implementing new technology and processes
(Case Study 8). Speed limits and no-idling po-
licies minimize unnecessary fuel consumption;
both practices can be enforced by on-board
computers. By adopting these methods, Sta-
ples28
has boosted its fleet fuel economy by
20% since 2007; this company is saving close
to 3.8 million liters of diesel fuel annually. In
addition, a number of technological improve-
ments can be integrated into trucking fleets.
Lastly, as detailed in Section 3, smart packing
methods can make transportation more effi-
cient by maximizing the amount of product
each shipping load can carry.
Efficient
transportation
4.2
37. CONSUMER GOODS RETAIL 37
Case Study 8
How Lowe’s ensures efficient transportation of goods
The initiative
Lowe’s only hires carriers that engage in the US Environmental
Protection Agency’s SmartWay Transport Partnership, a vo-
luntary program that promotes more efficient transportation
technologies and practices and certifies carriers with more
sustainable operations.Lowe’s encourages the use of auxiliary
power units to reduce idling fuel consumption and trailer fai-
rings to improve aerodynamics.
Lowe’s is also an active member of the Coalition for Responsible
Transportation (CRT) and is heavily involved in the CRT,Environ-
mental Defense Fund and EPA SmartWay CleanTrucks Initiative,
which provides a framework for reducing truck-related GHG
emissions at ports.
Benefits
Since 2005, the SmartWay program has reduced the highway
travel of the company’s carriers by 560 million miles (901 mi-
llion kilometers) and resulted in diesel fuel savings of more
than 100 million gallons (378 million liters).That is a carbon sa-
ving of more than one million tonnes.The EPA honored Lowe’s
efforts in 2011 with a SmartWay Champions award, the fourth
consecutive honor Lowe’s has received from its EPA partners.
Background
Lowe’s Home Improvement Warehouse is a US retailer that sells household products and construction materials. Lowe’s does
not own a truck fleet and is therefore forced to collaborate with its carriers to develop more sustainable practices.
Source: HYPERLINK“http://www.rila.org/sustainability/sustreport/sustainability-
report-landing-page/”http://www.rila.org/sustainability/sustreport/sustainability-
report-landing-page/pages/default.aspx
38. IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
Alternative fuels, such as natural gas, biodiesel, and
electricity are less carbon intensive than traditio-
nal fuels. In 2010, Staples tested and ordered 40 all-
electric powered trucks29
. As noted in Case Study 8,
the EPA’s SmartWay Transport Partnership30
helps re-
tailers reduce their transport-related carbon footprint.
The SmartWay program provides resources for transporta-
tion companies to quantify fuel use and emissions, develop re-
duction goals, and create strategic plans of action. The recent
volatility in fuel prices has given companies strong incentives
to transform transportation fleets. Looking forward, these dri-
vers will continue to increase in importance as fuel prices rise
and international consensus develops around carbon action.
Alternative
fuels
4.3
39. CONSUMER GOODS RETAIL 39
Case Study 9
UPS’s green fleet
Background
UPS operates over 100,000 delivery and transport vehicles as well as the world’s 10th largest airline.The search for enhanced
fuel efficiency is part of the group’s core business..
The initiative
UPS takes long-term business decisions regarding vehicles
employing alternative fuels and advanced technology under
a strategic approach that includes:
- Continuing to expand the green fleet slowly and increasing
the knowledge gained from the rolling laboratory strategy.
- Continuing to work with manufacturers of alternative
fuel and advanced technology vehicles to let them know
the company’s requirements and what UPS learns when it
operates their vehicles.
- Participating in public-private projects aimed at achieving
critical mass for promising low-emission vehicles and
infrastructure, such as the Interstate Clean Transportation
Corridor in the United States.
Benefits
UPS expanded its green fleet by 35% in 2011 to 2,500 vehicles.
Alternative fuel and advanced technology vehicles include
propane,compressed and liquefied natural gas,hybrid electric,
hybrid hydraulic, and all-electric vehicles. UPS has placed an
order for 100 all-electric vehicles for delivery in 2012; these
vehicles will displace approximately 126,000 gallons of fuel
annually. The company has also purchased 48 new liquefied
natural gas (LNG) trucks and 41 new hybrid hydraulic vehicles.
The UPS green fleet logged 200 million miles between 2000
and 2010 and is expected to log another 200 million by 2017.
Two-thirds of these alternative fuel/advanced technology
vehicles operate in the United States; the rest are on the
roads in Brazil, Canada, Chile, Germany, Hong Kong, Mexico,
Netherlands, South Korea, Thailand, and the UK. UPS has
reduced its fuel consumption from 0.127 gallons per ground
package in 2008 to 0.116 in 2012.
Source: UPS Corporate Sustainability Report 2011
40. IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
5. Consumption
It is important to stress upfront that sustainability does not
just meangettingconsumers tochoose theoddgreenproduct;
the true challenge lies with fostering customer loyalty to the
more environmentally-friendly products and getting them to
change how they use and dispose of their products.
A product’s ecological footprint is not just the result of its
design, manufacturing, and transport, but is also shaped by
how it is used and disposed of at the end of its life. As is the
case at the other stages of the supply chain already analyzed,
it is hard for retailers to influence what happens to their
products when shoppers walk out their doors. Nevertheless,
there are innovative strategies emerging in the sector aimed
at educating consumers and shaping their behavior during
product usage. In parallel, several reverse logistics initiatives
attempt to recover the product after usage for the purpose of
reintroducing it into the value creation chain,thereby closing
a traditionally open loop (Chart 6).
CHART 6: RETAIL SECTOR CHANNELS OF
INFLUENCE OVER CONSUMPTION
Minimization
of waste,
reutilization,and
recycling
Influencing
consumer
choice
Information
to foster
sustainable use
Consumption
?
41. A recent Eurobarometer survey on Europeans’ attitudes
towards the issue of sustainable consumption and
production31
revealed that eight out of every 10 EU citizens
felt that a product’s impact on the environment was
an important element when deciding which products
to buy. A large majority of respondents claimed to be
keen to buy more environmentally-friendly products.
The survey also revealed that retailers are faced with a
unique opportunity to reach a large number of people on
a daily basis. However, prior Eurobarometer surveys had
already highlighted a significant gap between consumer
perception and consumer behavior. Fifty-five per cent
of EU citizens claimed to be fully aware or know about
the most significant impacts on the environment of the
products they buy or use.This suggests that manufacturers
and retailers that manage to respond to the new
environmental challenges have much to gain. By stressing
the environmentally-friendly attributes of their products,
retailers can gain a competitive edge, particularly if they
manage to translate these attributes into cost savings for
the end consumer32
.
Retailers can shape consumer choice, nudging buyers
towards more sustainable products directly, by modifying
the products they sell and how they promote them, or
indirectly, by providing information or financial incentives.
In terms of direct influence, retailers can help consumers
to choose green products by expanding their range of en-
vironmentally-friendly products. Green products can even
be produced directly by the retailer for their private label
ranges,although this is less common.What is a widespread
practice among retailers is the offering of green products,
albeit often with limited availability33
. Some retailers have
i n t r o d u c e d
specific pro-
duct ranges for
environmentally-
conscious consumers
(Case Study 10). On the other hand, as detailed in Section
2, retailers can also influence consumer choice by refusing
to supply certain environmentally unfriendly products
(choice-editing).
Staying with the supply side of the equation but moving
away from the sustainability of specific products,
matching supply to demand provides another opportunity
for fostering more sustainable consumption. Intense
management of this information by certain US supermarket
chains,coupled with initiatives to simply reduce the variety
of products on supermarket shelves, is slashing some of
the billions of dollars in food waste every year, along with
the attendant environmental ramifications34
.
In taking the indirect route, information can influence
consumer choice by means of several mechanisms: the
use of official and retailer-specific eco-labels (see the box
on Regulations), placing green products prominently in
appropriately advertised store sections (shelf placement is
key to this end), mixing green products with conventional
products (highlighting their more environmentally-
friendly attributes), brochure/leaflet campaigns (green
product campaign, etc.), and information on the website,
etc. It is probable that given the prevailing economic crisis
these campaigns will be more successful if in addition to
highlighting the environmental benefits, they also flag
the cost savings implied throughout the product’s entire
useful life (e.g. energy-efficient bulbs).
CONSUMER GOODS RETAIL 41
Influencing
consumer
choice
?
42. IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
Case Study 10
Leroy Merlin: “Eco-options” program
The initiative
The chain’s Eco-Options encompass almost 5,000
environmentally-friendly product references grouped into five
categories:
- Water savings: products designed to reduce water
consumption in homes and gardens.
- Healthy Home:products that meet environmental protection
standards and reduce the release of emissions that are
harmful to health or toxic for the environment to their
minimum expression;products that facilitate waste recycling
and reutilization; and products that filter water/air.
- Energy-efficiency: products designed to save energy and
reduce carbon dioxide emissions.
- Renewable energy: products that give off alternative energy
from clean sources such as the sun and the wind and products
that use renewable energy sources.
- Sustainable forestry: wood and derivative products sourced
from forests that are managed sustainably. These products
are certified under two international standards (FSC and
PEFC) that guarantee their legal origin, sustainable felling
and control throughout the entire chain,from transformation
to retail distribution.
Eco-labeling:
There are various eco-labels to distinguish eco-friendly
products in the marketplace. Some of the more widely-used
labels include: the EU eco-label, the FSC (Forest Stewardship
Council), PEFC (Programme for the Endorsement of Forest
Certification) and MSC (Marine Stewardship Council) labels,
the fair trade label and the EU organic products label.
In general terms, these labels can be classified as either
obligatory or voluntary. The first category includes the EU
Energy Labeling Directive (Directive 2010/30/EU of May 19,
2010), which seeks to raise consumer awareness of their
household appliances’ energy performance by means of an
energy consumption label at the point of sale. The organic
product eco-label is also worth mentioning here (Council
Regulation (EC) N° 834/2007 of June 28, 2007). Among the
voluntary labeling schemes,those created by retailers such as
Coop,Carrefour,Migros,Staples,MS,REWE Group andTesco
stand out. The International Standardization Organization
(ISO)hasdevelopedstandardsforvoluntaryeco-labelschemes.
Integrated product policy (IPP):
With its integrated product policy,the European Commission
proposes a strategy to promote the development of a market
for greener products.This strategy requires the engagement
of all stakeholders in all areas of possible intervention and
throughout products’entirelifecycles:manufacturers,retailers,
consumers, and NGOs. IPP focuses on those decision points
which strongly influence the life cycle environmental impacts
of products and which offer potential for improvement,
notably eco-design of products, informed consumer choice
and the polluter pays principle in product prices.Among other
measures, IPP proposes differentiated taxation according to
the environmental performance of products,the provision of
understandable, relevant, and credible information through
Regulation
Background
In 2009 Leroy Merlin Spain launched its Eco-Options project to offer shoppers more environmentally-friendly household products.
43. CONSUMER GOODS RETAIL 43
labelingontheproduct,extensionofthescopeoftheEuropean
eco-label to new products and the use of public procurement
to foster the manufacture of more green products.
Action Plan for Sustainable Consumption and Production:
The European Commission proposes application of a series
of measures designed to enhance products’ energy and
environmental performance throughout their entire useful
lives and to stimulate demand for and consumption of better
products, thereby creating a ‘virtuous circle’. The Action Plan
combines the IPP instruments into a coherent package of
policies aimed at fostering better products and smarter
consumption patterns. It therefore constitutes a significant
milestone in implementing the IPP instruments at the
Community level. Delivery of these targets can be facilitated
particularly by measures to encourage the reduction of the
carbon footprint of the retail sector and its supply chain,
promote the manufacture of more sustainable products and
better inform consumers. The Commission plans to act by
making resource usage more efficient (generating more value
withfewerresources),championingenvironmentalinnovation
and reinforcing industry’s environmental potential with its
review of the European Eco-Management and Audit Scheme
(EMAS),drawingupindustrialpoliciesthatfavorenvironmental
industries and helping small and medium sized enterprises
(SMEs) to tap business opportunities in the environmental
and energy fields.
Benefits
In 2010 Leroy Merlin sold more than 13 million units from
its Eco-Options range, which encompasses almost 5,000
environmentally-friendly product references. This strategy
is reinforcing the chain’s market positioning by giving it a
more eco-friendly image.
Source: Press release, March 2009.
Source:
-European Commission (2001). Green Paper of February 7, 2001, on integrated product
policy (COM (2001) 68 final).
-European Commission (2008). Communication from the Commission to the European
Parliament,the Council,the European Economic and Social Committee and the Committee
of the Regions, of June 25, 2008, on the Sustainable Consumption and Production and
Sustainable Industrial Policy Action Plan(COM(2008) 397 final).
-European Commission (2009). Report from the Commission to the Council, the Euro-
pean Parliament, the European Economic and Social Committee and the Committee of
the regions on the State of Implementation of Integrated Product Policy. SEC(2009)1707,
COM(2009)693 final.
-European Commission (2012).Integrated product policy.Europa,Summaries of EU legisla-
tion.http://europa.eu/legislation_summaries/consumers/consumer_safety/l28011_en.htm.
44. IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
Off-shelf placement of green products (in green corners) is
particularly appealing to green consumers,while it is better to target
regular shoppers by mixing green items by product category,as these
shoppers might go for the more environmentally-friendly option if it
is presented as an alternative when browsing for a given product35
.
The chance to talk with store staff can also be a useful source of
information36
, although the evidence in the studies performed is
inconclusivein thisrespect.It isalsoimportant tocreateopportunities
for testing new products (particularly food products) in-store.
In addition to providing information, retailers can be proactive in
trying to influence consumer decision-making by means of financial
incentives in the form of price discounts or 2-for-1 or 3-for-2 offers or
the provision of information on matters that directly affect shoppers’
wallets (green product cost-benefit analysis). For example, REWE
Group offers price reductions for green products during specific
campaigns i.e. during its ‘Save the Polar Bears’ campaign. Auchan
France offers a 5% discount all year round on its white label green
products. Walmart highlights the financial benefits of buying
energy-efficient light bulbs.Media-Saturn (Case Study 11) conducted
a campaign in 2007 to inform consumers of the financial and
environmental benefits of energy-efficient electric devices.
45. CONSUMER GOODS RETAIL 45
Case Study 11
Metro Group - Media Markt and Saturn:
“energy-saving weeks”
The initiative
In 2007, Metro Group launched a large-scale consumer
awareness campaign in conjunction with the German
Energy Agency for its specialist electronics chains,Media
Markt, and Saturn. The kernel of the campaign was to
make consumers aware of the dual benefit of energy-
efficient devices,i.e.,cost savings coupled with a reduced
climate impact. The Agency trained the staff at the
Group’s German stores so that they were equipped to
inform their customers about how to use the European
eco-label to identify environmentally-friendly fridges
and washing machines.To overcome the price barrier,the
stores ran‘energy-saving weeks’, offering store vouchers
to shoppers purchasing the more efficient models. For
example, customers that purchased an A+ rated fridge
were given a €100 store gift card.
Benefits
Data compiled by market researcher GfKGroup
demonstrated the campaign’s success: today 50% of
fridges sold in Germany carry the A+ or A++ eco-label.
Background
German retailing giant Metro Group focuses its sustainability management on ensuring the company’s economic
future in a responsible manner. This means building social and environmental demands into all of its activities
throughout the entire supply chain.
Source:
-European Commission (2010). Eurobarometer survey on Europeans’ attitudes
towards the issue of SCP. Retail Forum Issue paper on marketing and effective
communication. Issue Paper No 3.
-http://www.metrogroup.de/servlet/PB/menu/1183120_l2_ePRJ-METRODE-
MAINPAGE/index.html
46. IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
Information
to foster
sustainable useAlong with production,
product use is the phase
that produces the most
environmental impacts37.
Some
products have lower environmental
impacts throughout their use while others require
consumers to shift their usage habits.For example,
compact washing soap requires the use of smaller
quantities of soap per load and enables washing
at lower temperatures, driving energy savings38
.
Retailers can give consumers information to
enable them to reduce the environmental impacts
of their everyday use of a given product. The
information provided can be general (information
highlighting the benefits of more sustainable
product consumption, such as information on
ways to save water or energy,as Coop does,among
other retailers), or product-specific. For example,
HM,and CA (Case Study 12) provide information
about how to wash their garments in the most
environmentally-friendly manner. Mercadona
includes labels on its washing machine soaps that
provide information on how to wash clothing in
the most sustainable manner39
.
This information can be provided on the website or
on the product label.Hoever,shoppers often don’t
read this information. A
more direct alternative is
to provide the information on
a sign placed beside the product
price display. Green products often cost
more upfront but are less expensive throughout
the overall product life cycle.Against this backdrop,
retailers can try to overcome the price barrier by
providing adequate information on the long-run
benefits,for example by providing information on
the reduced electricity costs associated with green
electric/electronic products throughout their
entire life cycles40
. Note that use and choice are
supply chain phases that are linked by consumer
information.
Walmart has pursued an interesting initiative
by working with suppliers to try to increase the
percentage of clothing that can be washed cold
in order to lower consumers’ electricity bills and
energy consumption.Walmart’s influence over its
suppliers (producers) is also evident in the case of
sustainable agriculture.Walmart’s goal is to sell $1
billion worth of food produced using sustainable
farming practices,to which end it plans to provide
training to one million farmers.
5.2
47. CONSUMER GOODS RETAIL 47
Case Study 12. CA labeling
Benefits
By washing at 30°C instead of 40°C,energy savings of up to 40% are
possible.Moreover,if customers choose to dry clothes naturally
instead of using dryers, electricity consumption drops
further. The measures taken help to reinforce the
perception that sustainability lies at the heart of
CA’s business model.
Background
CA believes that sustainability can only be achieved by following a strategy that goes beyond financial
reports,engaging employees,customers,and all supply chain stakeholders in matters relating to environmental
concerns, product safety criteria and working conditions.
Source: HYPERLINK“http://www.c-and-a.com”www.c-and-a.com
The initiative
CA tries to raise customer awareness
about ways to save energy. To this
end, the washing instructions sewn
into the garments it sells include
not only the related instructions but
also environmentally-friendly advice,
encouraging users to wash at lower
temperatures.
48. IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
Once a produce has been consumed and/or reached the end of its useful
life, retailers can influence how it is ultimately disposed of.
Two classes of consumer products can be distinguished for this purpose:
(i) disposable products (including perishables) or high-turnover products
which consumers typically buy daily (food,health beauty,and cleaning
products);and (ii) more durable products (textiles,electric products).It goes
without saying that retailers’influence over consumers varies in each instance.
For disposable products, the end-of-life waste relates to the packaging, i.e., not with
the product itself, which has been consumed. As outlined in Section 3, the packaging can be reused
or recycled.Under the 4Rs approach41
,which establishes a waste management hierarchy,reuse is the
most environmentally-friendly option. Coop’s Italian operations provide a practical example of how
retailers can encourage the reuse option (Case Study 13).
Minimization
of waste,
reutilization,
and recycling
5.3
49. CONSUMER GOODS RETAIL 49
Case Study13. Reuse at Coop Italy.
The initiative
In 2006, Unicoop Firenze and Unicoop Tirreno (Coop
subsidiaries) introduced an innovative detergent
distributionsystem:theyprovidedconsumerswith reusable
bottles for refilling with various liquid detergent types by
means of automatic dispensers. In 2008 this innovative
refilling system was extended to the stores in Parma,
Mantova, and Piacenza.
Benefits
The use of this system allows the repeated use of a plastic
bottle weighing approximately 60 grams, in turn driving
savings of 1.5 KWh of electricity, 240 liters of water and 14
grams of carbon dioxide. As a result, this new detergent
refilling system is generating significant savings in energy
and water as well as carbon emissions. In parallel, it is
also likely that the refilling distribution system is driving
customer loyalty, providing an additional source of value
creation for the entity.
Source:
BIO Intelligence Service (2009).Towards a Greener Retail Sector, European Commission: 233.
Chkanikova, O. Mont, O.2011. Overview of sustainability initiatives in European food retail sector. IIIEE WORKING PAPER 2011:1
Background
Colored high-density polyethylenes (HDPE) are commonly used to make plastic detergent bottles. Coop Italy, a system
of Italian consumer cooperatives that make up the biggest retail chain in the country, has established an initiative for
reducing waste and streamlining bottle usage.
50. IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
In the case of durable products,the material may have become impaired du-
ring continued use and may also be eligible for reuse or recycling.Some retai-
lers are developing infrastructure for recovering value from these products.
For example, Target offers recycling stations for glass, plastics, aluminum,
paper, plastic bottles, and some electronic waste; Staples provides pick-up
points for used printer ink cartridges; Best Buy provides product buyback
alternatives (Case Study 14). In 2010, Gap Inc. launched a jeans recycling
program called Recycle Your Blues, under which consumers were given the
option of recycling their jeans and getting a discount on a new pair. Gap
Inc. collected 360,000 pairs of jeans under the program; the retailing giant
used them to create fiber insulation for over 700 homes. Clearly initiatives
of this nature help consumers to reduce their environmental impacts42
.
51. CONSUMER GOODS RETAIL 51
Case Study 14. Best Buy promotes responsible end-
of-life product management
- Buy Back Program: when consumers no longer want the
product acquired under this program, they can exchange
it (provided it still works) for a gift token.
- E-commerce Program under which consumers receive a gift
token in exchange for used electronic products, musical
instruments, video games, CDs and DVDs.
- Free recycling options designed to help consumers get rid of
their used electronic products,again regardless of whether
they were originally purchased at a Best Buy establishment.
Best Buy has agreements with companies that specialize
in responsible recycling. Best Buy currently offers the fo-
llowing recycling programs in addition to its own in-store
recycling program:
- Recycling kiosks where consumers can hand in used ink
cartridges, rechargeable batteries, and old cords.
- TV Appliances Haul-away service: Best Buy will pick up
and take away a household appliance or television from a
customer’s home for free when they buy a product under
the Best Buy Home Delivery program.
- TV Appliances Pick-up service:For $100,Best Buy will give
consumers an appointment for picking up as many as two
household appliances or televisions for recycling.
Background
Electronic products are one of the fastest-growing sources of waste on the planet. As a retailer of electronics goods, Best Buy
tries to make it easier for consumers to choose greener products, use energy to power their electronic devices and household
appliances more efficiently and provide appropriate end-of-life solutions for the products its sells.
Source:
-RILA Report, HYPERLINK“http://www.rila.org/sustainability/sustreport/
sustainability- report-landing-page/Pages/defauft.aspx” http://www.
rila.org/sustainability/sustreport/sustainability- report-landing-page/
Pages/defauft.aspx
-Best Buy website, HYPERLINK “http://www.bestbuy.com/site/Global-
Promotions/”http://www.bestbuy.com/site/Global-Promotions/
Recycling-Electronics/pcmcat149900050025.c?id=pcmcat149900050025
; HYPERLINK “http://www.bestbuy.com/site/Global-Promotions/Recyde-
FAQs/pcmcat”http://www.bestbuy.com/site/Global-Promotions/Recyde-
FAQs/pcmcat 174700050009.c?id=pcmcat174700050009
The initiative
Best Buy offers shoppers three recycling choices before and
after product purchase, regardless of whether the product
was bought at a Best Buy establishment:
Benefits
Best Buy aims to recycle one billion pounds of consumer pro-
ducts by the end of 2014. It endeavors to make sure that the
recycling operators it works with adhere to the most stringent
standards so that the products traded in or brought to their
establishments for recycling do not end up in landfills or abroad
and that all hazardous waste is handled properly.
52. IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
6. Opportunities
and challenges
The thesis at the heart of this report is that the retail sector can be viewed
as a‘hinge’sector,pivotal in reducing the environmental impacts of the
production and consumption processes.The report has shown,putting
forward a series of arguments and showcasing a number of best
practices,that the retail sector can use its strategic positioning
to have a real and effective influence on suppliers and
consumers, making all phases of the product value chain
– from design and manufacturing, through packaging
and transportation to product choice, use, and disposal
– more sustainable.
Here are the main conclusions reached, synthesized in
the form of opportunities and challenges for the sector:
In the design and manufacturing phase, as regulatory
and consumer pressure grows, product design is bound to
graduallyincorporateamyriadofenvironmentalconsiderations,
duly weighing energy, carbon, material, chemical, recyclability,
water waste,and other needs against functionality,performance and
price considerations. ‘Green chemistry’43,
‘cradle to cradle analysis’44
,
and‘design for the environment’45
techniques will become increasingly
commonplace in the product design process for private and brand label
products alike.
Transparencylevelsinconsumerproduct supplychainsareset tocontinue
to increase swiftly,injecting visibility into the working conditions,human
rights and environmental impacts of product manufacture. A series
of factors will accelerate this trend, notably among which growing
disclosure and commitment demands from regulators, consumers, and
investors regarding products, how they are made and how they are
distributed.
53. CONSUMER GOODS RETAIL 53
Relations between retailers and suppliers based on trust and a joint
sustainability effort will pave the way for more open and unguarded
exchange of information, particularly if the retailer is committed to
working with its suppliers for the long-run.Both parties will join forces on
taskforces with other companies,governments,non-profit organizations
and academic institutions for the purpose of exchanging know-how and
resources.Similarly,both parties will set and share supply chain targets
in order to align their priorities and continue to track their progress.
Ultimately,retailers and their suppliers will continually improve how
they make products in order to reduce the environmental and social
impact of the whole process.
Pared-back packaging volumes can translate into significant cost
savings and a better environmental record by using fewer materials and
streamlining logistics and transport operations.The significant reductions
in energy consumption, GHG emissions and volumes of materials used
spell reduced environmental impacts. Although some of these measures
can be taken by the retailer without having to collaborate with other
players (e.g., reducing private label product packaging and containers),
the real challenge lies with engaging other players in the value chain
and, most importantly, engaging suppliers and consumers in the task of
reducing packaging materials.
54. IEFOUNDATIONADVANCEDSERIESONPROBLEM-DRIVENRESEARCH
SUSTAINABILITYadvanced series
One of the greatest obstacles to maximizing transportation efficiency is the lack of commercially available,low
carbon technology. However, natural gas and electric-powered trucks are already becoming popular and will
become even more so as their prices fall. Retailers can help expand the availability of these technologies by
pilot testing low carbon transportation methods and expanding their pilots whenever financially feasible. In
the meantime, however, retailers can optimize shipping by using efficient packing and distribution processes
and currently available transportation technologies.Many retailers have already incorporated these approaches
into their operations, which are rapidly becoming business as usual. In the long term, achieving carbon neutral
shipping will likely be the goal of many retailers. Just as the automobile industry is catering to the demand
for more fuel-efficient vehicles, the trucking industry will continue to do the same. By embracing smarter
transportation, retailers can both reduce unnecessary costs and shrink their carbon footprint.
Lastly,mounting consumer preferences for more environmentally-friendly products suggest that manufacturers
and retailers that manage to adapt to emerging environmental challenges have much to gain. By stressing the
environmentally-friendly attributes of their products, retailers can gain a competitive edge, particularly if they
manage to translate these attributes into cost savings for the end consumer.Retailers can shape consumer choice,
nudging buyers towards more sustainable products directly, by modifying the products they sell and how they
promote them, or indirectly, by providing information or financial incentives.
55. CONSUMER GOODS RETAIL 55
Consumer information can also be put to use to reduce the environmental ramifications of everyday product
use considering that product use tends to be one of the phases with greater environmental consequences. And
by stressing the cost savings accruing to consumers throughout product life cycles, retailers stand to overcome
the barrier implied by the higher price of these products, ultimately benefitting retailers’ profitability. Making
products more environmentally-friendly to use may require supplier engagement.
Lastly, retailers can also influence how their products are disposed of after consumption or at the end of their
useful lives. Specifically, encouraging the reutilization of containers can result in significant cost savings for
retailers in respect of products for which waste is mainly packaging-derived.
Broadly speaking, although these efforts do not always produce meaningful returns in the short turn, by
championing improvements in their environment these retailers will unquestionably create value and buy
business sustainability medium and longer term, while setting themselves apart from their competitors and
positioning themselves to better handle the growing clamor from regulators,consumers,and investors for more
information and stronger environmental pledges.