Sustainability in Retail & CG

IE FOUNDATION ADVANCED SERIES ON PROBLEM DRIVEN-RESEARCH

advanced seriesFoundation

the driving force behindthe shift towards sustainable production and consumption

CONSUMER GOODS & RETAIL 1

PROBLEM DRIVEN RESEARCH

foundation

2013 No. 01

The retail sector:

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SUSTAINABILITYadvanced series

EDITORIAL BOARD

Marco Trombetta Vice-Dean of Research IE Business School

Manuel Fernández NuñezBusiness Development Director Consumer Products & Retail Ernst & Young

Margarita VelásquezGeneral Director IE Foundation

Fabrizio SalvadorSenior Academic Advisor IE Foundation

Alfonso GadeaProject Director IE Foundation

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.


Marco TrombettaVice-dean of Research at IE Business School

Vice-dean of Coordination and Research, IE University

Greetings

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Research team

Greetings IE Foundation

Greetings Ernst & Young

Executive summary

Introduction

Design and manufacturing2.1 Banned substances

2.2 Life cycle and carbon footprint analysis

2.3 Supply chain transparency

Packaging3.1 Involvement of producers and consumers

3.2 Direct reduction of packaging at retail establishments

3.3 Reduction of packaging for transportation

Transportation4.1 Route optimization

4.2 Efficient transportation

4.3 Alternative fuels

Consumption5.1 Influencing consumer choice

5.2 Information to foster sustainable use

5.3 Minimization of waste, reutilization, and recycling

Opportunities and challenges

References

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, a Visiting Fellow at Cambridge University and

an Independent Expert assisting the European Commis-

sion in the evaluation of proposals for FP7 Theme 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.

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Javier Carrillo-HermosillaAssociate fellow at IE Foundation and Professor at Alcala University

Research team

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, Pontificia Comillas University. Professor Könnölä holds

a Doctor of Science and Licentiate of Science in Technology

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-

novation management and policy, 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.


Pablo del Río González Associate fellow at IE Foundation and tenured scientist at CSIC).

Totti KönnöläCEO of Impetu Solutions and Associate Professor at IE Business School (Operations Management)

foundation

Rafael PuyolVice-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.

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José Luis Ruíz ExpósitoPartner 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.


Executive summary

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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


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.


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.


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


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.


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


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.


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.

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1. Working between suppliers and consumers

Introduction

Environmental protection requires reducing the environmental

consequences of production and consumption throughout a pro-

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) account for over half of households’ environmental impacts1.

It is therefore vital to refocus production and consumption activi-

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). The sector is therefore strategically positioned

to influence suppliers (upstream) and consumers (downstream)

throughout the product value chain. Moreover, as is well known,

the sector can have a significant environmental impact as a result

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

limited to reducing the direct environmental impacts of their store

operations. This is a considerable challenge for the sector to the

extent that it implies pursuing initiatives that may undermine the

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

profitability for retailers by enabling them to set themselves apart

from their competitors and position themselves to better handle

the growing clamor from regulators, consumers, and investors for

more information and stronger environmental pledges.


RetailProduction

ConsumptionFigure 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 inf luence 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 optimizationEfficient transportationAlternative fuels

Involvement of producers and consumers

Reduction of packaging at retail establishments

Reduction of packaging for transportationPACKAGING

DESIGN AND MANUFACTURING

CONSUMPTION

TRANSPORTATION

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

their shelves. More specifically, retailers can include environmental criteria when

selecting which products to sell to their customers among those offered by

the various brand suppliers (choice-editing), even though their ability to

influence how these products are designed may be slim compared to their

influence over private label product design. Against this backdrop, 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.

Design and manufacturingSupply chain

transparency

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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

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).Design and

manufacturing

Lists of banned

substances

Life cycle and carbon footprint analysis


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

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

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2.1

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.


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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

EKTORP


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-friendly products, such as the EKTORP

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

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).IE F

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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- epsponsibi l i ty/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-supplychain-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 by Walmart 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.


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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 a credible commitment has been made to supply chain

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


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 Norske Veritas (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.

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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


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 inf luence over packaging

Packaging

Reduction of packaging at retail establishments s

Reduction of packaging for transportation

Involvement of producers and consumers

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Involvement of producers and

consumers

3.1


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.

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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


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

consequences by reducing the weight of packaging,

eliminating raw materials and replacing certain

materials with others. To this end Eroski developed

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.

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Dealt with again in Section 4, smart packing methods improve transportation

efficiency by maximizing product loads per dispatch. Certain retailers appear

particularly keen to streamline packaging volumes, as the resulting reduction

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

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.


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.

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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


The mid-term review of the 2001 White 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

Route optimization involves assessing product transportation

patterns and combining routes where possible. By re-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

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Supplier warehouse

(Seville)ACOTRAL Train station Transportation via

RENFE

200,000 tonnes and 416 train journeys per year 10,000 fewer truck journeys a year

c c c


Background

Mercadona, Acotral, and Renfe-Freight have an agreement covering the transportation of non-fresh food and non-food goods

between Seville and Tarragona/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 7Mercadona: Renfe/Acotral intermodal logistics platform l

Distribution center

(Valencia)ACOTRALTrain stationTransportation via

RENFE

200,000 tonnes and 416 train journeys per year 10,000 fewer truck journeys a year

c c c

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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


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 Clean Trucks 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

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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


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

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5. ConsumptionIt is important to stress upfront that sustainability does not

just mean getting consumers to choose the odd green product;

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

?

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

specif ic pro-

duct ranges for

e nv i ro n m e nt a l l y-

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).


Influencing consumer

choice

?

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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, M&S, REWE Group and Tesco

stand out. The International Standardization Organization

(ISO) has developed standards for voluntary eco-label schemes.

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’ entire life cycles: 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.


labeling on the product, extension of the scope of the European

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

with fewer resources), championing environmental innovation

and reinforcing industry’s environmental potential with its

review of the European Eco-Management and Audit Scheme

(EMAS), drawing up industrial policies that favor environmental

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.

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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

inconclusive in this respect. It is also important to create opportunities

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.


Case Study 11Metro 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

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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,

H&M, and C&A (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


Case Study 12. C&A 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

C&A’s business model.

Background

C&A 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

C&A 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.

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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


Case Study13. Reuse at Coop Italy.

The initiative

In 2006, Unicoop Firenze and Unicoop Tirreno (Coop

subsidiaries) introduced an innovative detergent

distribution system: they provided consumers with 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.

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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.


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.

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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

gradually incorporate a myriad of environmental considerations,

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.

Transparency levels in consumer product supply chains are set to continue

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.


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.

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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.


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.

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1 European Commission (2009). Towards a greener retail sector.

European Commission (DG ENV). 070307/2008/500355/G4.

2 Various retailers purchase environmentally-friendly products for their own use. Examples of these green procurement policies include: Marks & Spencer, Kesko (for store purchases), H&M (for centralized purchases), Tesco, Inditex, IKEA, Carrefour (for catalogue paper), etc. These policies mainly target the following product categories for which environmental labels exist: paper (recycled, reduction of the weight, FSC or PEFC labeling, etc.), IT equipment (Energy Star labeling), cleaning products, and green electricity. These policies often mainly concern centralized procurement of the groups or of the administrative offices, and not of the stores, which often have autonomy in their purchases (European Commission DG ENV 070307/2008/500355/G4, towards a greener retail sector, February 2009).

3 http://www.iso.org/iso/catalogue_detail?csnumber=43241

4 http://ec.europa.eu/environment/ipp/lca.htm

5 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).

6 In Europe, the minimum requirements are governed by Regulation 1907/2006/EC, known as REACH (Registration, Evaluation, Authorization and Restriction of Chemical Substances): http://ec.europa.eu/environment/chemicals/reach/ reach_intro.htm

7 Leading collaborative initiatives formed to foster supply chain transparency and social and environmental sustainability:

Business Social Compliance Initiative: www.bsci-intl.org

Ethical Trading Initiative: www.ethicaltrade.org

Fair Factories Clearinghouse: www.fairfactories.org

Fair Labor Association: www.fairlabor.org

Global Action Network for Transparency in the Supply

Chain: www.globalreporting.org/CurrentPriorities/SupplyChain/GlobalActionNetwork/GAN.htm

Global Social Compliance Program: www.gscpnet.com

International Textile, Garment and Leather Workers Federation: www.itglwf.org

Social Accountability International: www.sa-intl.org Sustainability Consortium: www.sustainabilityconsortium.org

Sustainable Apparel Coalition: www.apparelcoalition.org

8 European Commission (2011). Packaging optimization. Retail Forum issue paper N°8. http://ec.europa.eu/environment/ industry/retail/pdf/packaging_%20issue_paper.pdf

9 Public institutions can also make a contribution to this effort, for example by raising consumer awareness of the environmental impacts of product packaging.

10 European Parliament and Council Directive 94/62/EC of 20 December 1994 on Packaging and Packaging Waste, 31/12/1994, http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:1994:365:0010:0023:EN:PDF

11 http://www.europen.be/?action=onderdeel&onderdeel=6 &titel=Publications&categorie=0&item=29

12 In the case of Spain, the reader is referred to the Spanish National Standardization Committee, CTN for its acronym in Spanish, specifically No 49 on Packaging and Containers (http://www.aenor.es/aenor/normas/ctn/fichactn. asp?codigonorm=AEN/CTN%2049&pagina=1). In the international arena, standard ISO/PRF 18602 Packaging and the environment -- Optimization of the packaging system (http://www.iso.org/iso/home/store/ catalogue_tc/catalogue_detail.htm?csnumber=55870) applies.

13 The Global Protocol on Packaging Sustainability: global-packaging.mycgforum.com

14 The Sustainable Packaging Coalition: www.sustainable-packaging.org

15 The Global Packaging Project: globalpackaging.mycgfo-rum.com

16 The European Organization for Packaging and the Environment: www.europen.be

7. References


17 For further details, see the Innventia AB model for optimal packaging: ‘Environmental Impact of Packaging: Performance in the Household’ report by Dr Jan Kooij- man, Food Technology Consulting

18 European Commission (2011). Packaging optimization. Retail Forum issue paper N°8. http://ec.europa.eu/environment/industry/retail/pdf/packaging_%20issue_paper.pdf

19 http://ec.europa.eu/transport/strategies/doc/2001_whi- te_paper/lb_com_2001_0370_en.pdf

20 http://www.modularsystem.eu/en/european_modular_system.htm

21 CVS Caremark. Corporate Responsibility - Using Resources Wisely: http://info.cvscaremark.com/our-company/corporate-responsibility/environment/using-resources-wisely.

22 http://ec.europa.eu/transport/themes/urban/urban_mobility/

23 http://ec.europa.eu/transport/themes/urban/studies/ doc/2012-04-urban-freight-transport.pdf

24 http://ec.europa.eu/transport/themes/strategies/2011_ white_paper_en.htm

25 http://www.piek.org/engels/home_eng.htm

26 Safeway. 2010 Corporate Social Responsibility ummary Report.http://safewaycsr.com/wp-content/themes/ SafewayCSR/PDF_Report_CVR-1.pdf.

27 Green Rankings 2012: Greenest Retail Companies in the U.S., http://www.thedailybeast.com/newsweek/galleries/2012/10/22/newsweek-green-rankings-2012-greenest-retail-companies-in-the-u-s-photos.html#6e24d7b2- a754-4425-9d3a-ac67c892e7b1

28 Staples. Environmental Solutions - Our Green Initiatives. [Online] http://www.staplesadvantage.com/solutions/ our-commitment/green-initiatives.html.

29 Staples. Environmental Solutions - Our Green Initiatives: www.staplesadvantage.com/solutions/our-commitment/green-initiatives.html.

30 Smartway Transport Partnership, a partnership in which

freight companies join and commit to benchmark operations, track fuel consumption and improve performance annually: www.epa.gov/smartway/

31 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.

32 European Commission (2010).

33 European Commission (2009). Towards a greener retail sector. European Commission (DG ENV).

34 “Supermarkets Finding That Less Stuff Means More Money (And Less Waste)”: http://www.fastcoexist. com/1680727/supermarkets-finding-that-less-stuff- means-more-money-and-less-waste



37 European Commission (2009). Towards a greener retail sector. European Commission (DG ENV).


49 European Commission (2009). Page 38.


41 http://www.iisd.org/business/tools/bt_4r.aspx

42 Retail Industry Leaders Association (RILA) (2012). 2012 Retail Sustainability Report: Successes, Challenges, and a Vision for the Future. http://www.rila.org/sustainability/ sustreport/sustainability-report-landing-page/Documents/RetailSustainabilityReport.pdf

43 Green chemistry: www.epa.gov/greenchemistry/

44 Cradle to cradle: mbdc.com/detail.aspx?linkid=1&sublink=6

45 Design for the Environment: www.epa.gov/dfe/

Sustainability Ernst & Young

Viewpoint

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Tomás Pastor GarcíaExecutive Director

Climate Change and Sustainability Services Ernst & Young

Many companies have approached the sustainability challenge solely from

the cost-cutting angle, driven by the prevailing business climate. Increasingly,

particularly among market leaders, businesses are taking their sustainability

strategies and pledges a step further, opting for initiatives that generate value for

their stakeholders and minimize their business risks. As a result, these companies

are worth more.

n our survey, “Six growing trends in corporate sustainability” (2012, Ernst & Young

in cooperation with GreenBiz Group), 76% of the executives and thought leaders

polled anticipate their company’s core business objectives will be affected by

natural resource shortages in the next three years. This requires strategic planning

to reduce exposure to this risk factor, including contingency plans. This is just one example of why a company

should approach sustainability looking beyond short-term demands.

The retail sector has a crucial role to play in this necessary and inevitable trend. It is crucial due to its positioning

between producers and consumers, receiving pressure from both sides. But also because of its ability to influence

both sets of stakeholders.

Transparency is on the rise. As well as financial reporting requirements, companies now have to report on a far

broader number of business aspects: initiative outcomes, carbon emissions and footprint, resource consumption,

product composition, etc. They are doing so using several platforms, including their websites, the social media,

corporate reports and product labels. The pressure borne by companies in this respect is what can trigger demands

for change on the part of its suppliers, for example. Once information starts to become available, reporting

requirements tend to grow. And companies won’t just be asked to provide transparency on quality but also on

their social, and ultimately, environmental impacts.

The other key lies with the sector’s reach. The ability to reach millions of users on a daily basis makes the retail

sector an ideal platform for shaping consumer behavior. It can use this influence to positively impact a product’s

end-to-end life cycle effects and the environmental impacts of its use and consumption. It is vital for consumers

to better understand the full consequences of their purchases to enable them to make better choices that are

not just price-driven. As a result, they will use products better and reduce their ecological footprints.

The thesis put forward throughout this report is totally in sync with the approaches being designed and

implemented by numerous leading companies and many of our clients. This value-creating driving force is an

engine of change and the retail sector is key to forging the path towards a more sustainable model.


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