Greening the Product Value ChainCreating Shared Value for Company, Customers and Community

January 26, 2012

Roger McFadden,

Vice President and Senior Scientist

Staples

Minnesota Green Chemistry 2012: Strategies for Growth

Five Stages of a Product’s Life

Make WasteEnd of Life, Landfill, incineration

TakeRaw material extraction and synthesis

Current rate of consumption is not sustainable

Cradle to Grave Product Design

Manufacturing, production, distribution, use

Impact of Poor Product DesignDirect Impacts

• Damage to business reputation and brand

• Higher costs to businesses and lower ROI

Supply chain disruption and company remediation costs

Product recall and replenishment costs

Product re-design or modification costs

• Higher costs to communities and taxpayers

Increases publicly owned treatment and disposal costs

Increases environmental remediation costs

Increases health care costs associated with chemical hazards and exposures

• Harm to human and animal health and well-being

• Harm to natural and built environment

Impact of Poor Product DesignIndirect Impacts

•Tests show 287 industrial chemicals in 10 newborn babies•Among the 287 chemicals found in the study, 134 can cause cancer, 151 can cause birth defects, 154 can cause hormone disruption, 186 are associated with infertility and 130 affect the immune system

287

Trends impacting supply chain management

Accelerated volume of chemical related communications between supply chain partners

Rising role of social media

and a growing green market

Growing consumer demand for radical transparency and disclosure

Emerging foreign and domestic chemical

legislation

TraditionalBusiness

SustainabilityLeadershipSocial Responsibility

Good for businessGood for the world

Legal Compliance

Led by Legal

Corporate Social Responsibility,

Environmental Protection, Philanthropy

Led by staff (e.g. CSR, PR)Separate from the business

Business Value from Smaller Footprint and Solving World’s

Challenges

Driven from the top Led by line management

Integrated into the business

Don’t get in legal trouble

Be a good corporate

citizenTap into new sources of

value

How are businesses approaching chemicals and supply chain management?

Reactive Compliance Proactive Disclosure Radical Transparency

8

Common Sustainability Goals

Transportation

Green Supply ChainWaste Reduction

CO2 Intensity Energy Efficiency

Green Buildings

Organizations of all sizes are now actively exploring opportunities to reduce their environmental impact and gain operational efficiencies. These opportunities fall into a number of areas:

What is a Greener Supply Chain?

• Beyond compliance• Increased transparency/disclosure across the supply chain• Safer chemical and product alternatives• Sustainable packaging• Zero waste targets• Improved energy efficiencies• Reduced dependency on fossil fuel• Shift towards readily renewable resources

Benefits of a Greener Supply Chain

Supports Basic ComplianceHelps meet growing demand for safer productsAligns with sustainability objectivesSupports green building initiatives and LEED certificationAvoids toxins and greenhouse gasesPrevents wasteEliminates product duplicationEnsures that suppliers do their partAttract and retain the best suppliers

To eliminate the environmental impacts and health hazards of chemicals of concern from our supply chain and replace them with safer more benign alternatives.

One of Our Key SCM Objectives

SiteImpacts

• Began by improving sustainability and reducing our environmental footprint within our own operations

• Incrementally expanding our scope of efforts to include suppliers and product use

• Increasingly address sustainability including chemical impacts across lifecycle of products and services

Supplier Impacts

Product and Packaging Impacts

Incremental and practical approach

Staples “Race to the Top” Supplier Strategy

Today

Light Green

Medium

Dark

More SKUs

Fewer SKUs

Light

Medium

DarkFewer SKUs

More SKUs

Tomorrow

“Unsustainable” SKUs

A “race to the top” moves our suppliers towards whatever “dark”

green represents for a specific category

Three Key Elements to Our Supplier Strategy

•Life Cycle Assessment

•Materials Chemistry

•Recycle/ Reuse

Key challenges to implementing a greener supply chain?

• Complex multi-tier supply chain

• Lack of information about chemicals

• Fear of regrettable substitution

• Risk of green washing

• Gaining senior business leaders support

How we engaged our suppliers

• Communicate a clear policy to suppliers

• Take a collaborative approach

• Frame disclosure as a compliance expectation

• Set attainable expectations, deliverables and timelines

• Offer implementation guidance

• Agree to prefer safer alternatives and reward innovation

How can suppliers benefit by supporting a greener supply chain?

• Assures compliance

• Reduces risk of being locked out

• Protects reputation and brand

• Creates value

• Avoids externality costs

Everybody wins with safer products

• Worker that makes them;

• Supplier that sells them;

• Logistics that transports them;

• Consumer that uses them;

• Environment that inherits them.

"There are risks and costs to a program of action. But they are far less than the long-range risks and costs of comfortable inaction."

John F. Kennedy (1917–1963)35th president of the United States

Risks and Costs of Comfortable Inaction

Thank You