2015 retail sustainability report

2015 Retail SustainabilityManagement Report

FOR THE RETAIL INDUSTRY LEADERS ASSOCIATION'S RETAIL SUSTAINABILITY INITIATIVE

PROGRAM SPONSORS

From The Retail Industry Leaders AssociationOn behalf of the Retail Industry Leaders Association (RILA) and our member companies, we are proud to present RILA’s third Retail Sustainability Report. RILA has been providing the industry with a forum to learn about sustainability activities in the retail industry and accelerate its progress for the past nine years.

This report is different from our first two Retail Sustainability Reports, published in 2012 and 2013, because its content is structured according to a tool that RILA recently developed, the Retail Sustainability Management Maturity Model. Tools like the Maturity Model and reports like this are the cornerstone of RILA's efforts to help companies understand how they compare to others in the industry, and how they may want to progress in the future.

Since the publication of the last report, we have seen companies grow more sophisticated by focusing their efforts on the most material issues—whether energy reduction in stores, engaging their suppliers, accessing product ingredient information, etc.—and engaging the most critical stakeholders—internal and external—to drive change. Companies are also better quantifying the business and environmental benefits of their programs, further justifying their efforts. As you will see illustrated in this report, these benefits are fueling the continued development of sustainability programs over time. But of course with progress on any major issue comes challenges as well.

Please use this report to understand the core components of a retailer's sustainability program. We will continue to publish this report in future years to show how the industry is progressing on key sustainability indicators.

Sandy KennedyPresident

Adam SiegelVice President,Sustainability & Retail Operations

Find more at www.rila.org/sustainability 2

Report ContentsLetter from the Retail Industry Leaders Association 2

About the Retail Industry Leaders Association 4

About this Report 5

About the Maturity Model 6

Sustainability Team Structures & Resources 7

Dimensions of Sustainability Management 10

Conclusion 47


About The Retail Industry

Leaders AssociationAbout RILAThe Retail Industry Leaders Association (RILA) is the trade association for the world’s largest and most innovative retail companies. RILA members include more than 200 retailers, product manufacturers, and service suppliers, which together account for more than $1.5 trillion in annual sales, millions of American jobs, and more than 100,000 stores, manufacturing facilities, and distribution centers domestically and abroad.

About RILA’s Retail Sustainability InitiativeRILA’s Retail Sustainability Initiative (RSI) engages retail sustainability executives to share leading practices, develop new processes, and communicate their efforts to the industry’s stakeholders. RILA uses its annual conference, benchmark studies, collaborative partnerships, and research on behalf of retail sustainability interests to help our members learn and develop their programs.

Learn more or access the program’s resources at www.rila.org/sustainability


About This ReportRILA’s first sustainability report, the 2012 Retail Sustainability Report, highlighted the major trends and best practices within the industry in a case-study format. The report found that environmental and social considerations were beginning to supplement traditional measures of competition, including price, service, and quality.

In 2013, we then determined that it was important to update that first report format to provide a RILA-wide snapshot. Therefore, RILA's second retail sustainability report highlighted indicators that the largest retail companies use to assess their sustainability programs.

We promised to update that format periodically to see how the industry progresses. This latest report continuesthat tradition, but in a more organized format.

Specifically, this report is aligned with a tool that RILA recently developed called the Retail Sustainability Management Maturity Model. This report summarizes retailers' current progress along the Maturity Model.

We also recognize that it is important to show future trends. So for each dimension of the Maturity Model, we report not just on retailers' current progress, but also where they expect to be in 2017. While we cannot definitively state that the industry will follow these projections, the trends provide a view of current priorities.

We will continue to update the data periodically to follow the industry's progress.

Sources of InformationThis report was developed through an online survey. The survey was disseminated in June of 2015; 42 retail companies responded, representing more than 50,000 locations and $620 billion in global revenue.

Retail CategoriesIn analyzing the results of the survey, we broke down respondents into four retail categories, namely small, medium, and large format, and grocery retailers. This breakdown accounts for differences in operational characteristics and allows for similar retailers to be compared to one another.

Sustainability Teams and Operations QuestionsOur first set of questions asked retailers about their sustainability teams and budgets to get a better context for what “sustainability management” really means at a national retail company.

Sustainability Management Dimensions QuestionsRetailers were then asked to consider their company’s progress in 27 dimensions of sustainability management.


About the Maturity ModelThis report is structured around RILA’s Retail Sustainability Management Maturity Model.

The Maturity Model is a tool for retail sustainability executives to identify the management practices that will drive improved corporate and environmental performance, and assess the maturity of their programs.It is divided into seven sections, including: Strategy & Commitment, People & Tools, Visibility, Retail Operations, Supply Chain, Products, and Environmental Impacts.

The Maturity Model is a tool that can be used for individual company and industrywide purposes. Individual retailers can use it to: identify the maturity of their program and opportunities for improvement,

facilitate internal conversations about the sustainability program’s development, access more funding for sustainability programs, train employees with sustainability responsibilities, obtain buy-in from leadership and other departments, evaluate internal and external perceptions about the program, and more.

The Maturity Model is based on Deloitte Consulting LLPand RILA's primary knowledge of the industry, and confirmed through three review periods that solicited input from environmental nonprofits and experts, and numerous retailers. While the first version specifically focuses on environmental impacts; subsequent versions may also include aspects of social, community, and diversity impacts.

To download the RILA Retail Sustainability Management Maturity Model visit www.rila.org/sustainability


Sustainability Team Structures

& ResourcesTeam StructuresThe first set of questions asked respondents about their sustainability teams' size, budgets, titles, and reporting structures to determine how roles and responsibilities of those teams are defined at nationwide retail companies.

While 30 percent have of respondents have just one executive dedicated to sustainability, nearly 20 percent have six or more people on the team. Further, sixty percent of respondents indicate that their company also has staff with part-time sustainability functions; often those executives manage other operational functions and work to integrate sustainability into those functions.

Senior Director, Director, and Vice President are the most frequent titles for the senior-most sustainability executive, and they report to a wide range of places within the organization.

Resources and BenefitsWe also asked about the benefits, risk mitigation opportunities, budgets, and payback periods that sustainability teams work toward. That informationilluminates the opportunities and constraints that teams must work within.

For the most part, sustainability budgets stayed the same this year relative to last, however, 30% of budgets did increase. Not surprisingly, the typical payback period that sustainability projects need to achieve is 2-3 years—on par with the projects of other functions.

Interestingly, sustainability is most often seen as a source of innovation for the company, though there are many other benefits: it can help companies enter new markets (regions, consumer segments, product types), mitigate risk, and enhance their brand.


Staff Devoted to Sustainability Title of Senior-Most Sustainability Lead

Sustainability Team Reporting Structure Sustainability Goals Set By

Sustainability Team StructuresRespondents provided information about their sustainability team sizes, structures, titles, and goal-setting processes.

0% 25% 50% 75% 100%

Other / N/A

EVP/SVP

Vice President

Senior Director/ Director

Senior Manager/ Manager

Percent of respondents

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Full-time Part-time

Per

cen

t o

f p

eer

resp

on

den

ts > 10

8 to 10

6 or 7

5

4

3

2

1

0

# people:

0% 25% 50% 75% 100%

Public Relations

Human Resources

Legal

Marketing

Facilities / Real Estate

Merchandising

Supply Chain

Other


0% 25% 50% 75% 100%

C-suite

Sustainability team

Functional department(s)

We do not havesustainability goals



Budget for Sustainability in 2015 Capital Investment Payback Requirement

Benefits of Sustainability Risk Mitigating Benefits of Sustainability

Resources for SustainabilityRespondents also provided information about their sustainability programs' budget trends, payback requirements, and benefits.

0% 25% 50% 75% 100%

No dedicated budget

Decreased

Remained the same

Increased


0% 25% 50% 75% 100%

It depends

No minimum

More than 5 years

3-5 years

2-3 years

1-2 years

Less than a year


0% 25% 50% 75% 100%

Increase profits

Reduce costs

Source of innovation

Employee retention

Brand enhancement

Risk management

New markets

Satisfy stakeholders

Satisfy consumers

Address regulation


0% 25% 50% 75% 100%

Reputation

Recruiting

Energy dependencies

Price fluctuations

Human rights

Financial instability

Weather conditions



Dimensions of Sustainability ManagementRespondents were also asked to consider their company’s progress in 27 dimensions that define an effective retail sustainability program. On the following pages, we track the current status and projections of the industry’s retail sustainability programs. Each page documents one of the 27 dimensions by overlaying the industry’s average maturity, the maturity of the current industry leader, and the average and industry leaders’ desired maturity two years from now. These “flags” are placed over the description of the corresponding maturity stage.

Those dimensions, and corresponding maturity stages, were initially described in RILA’s Sustainability Management Maturity Model. The Maturity Model as a standalone document is a roadmap to help retail sustainability managers optimize their programs. Retailers can use it first to baseline the maturity of their program and then to identify the highest leverage opportunities for improvement.

Further, each dimension is linked to a range of resources, case studies, and existing working groups that are already informing management of that particular dimension and catalogued in RILA’s Sustainability Management Resource Library.

In the survey, retailers were asked to select the maturity stage that is most representative of their current state and then the maturity stage that most closely reflects where they plan to build their program in the next two years. Having those two data points allowed us to plot the industry’s current average and the highest performing “leader,” as well as their ambitions for development over the next two years.

You can view the complete Maturity Model and the Resource Library at www.rila.org/sustainability


Dimensions of Sustainability Management12 Maturity Comparison Across All Dimensions

13 Strategy & Commitment

14 Strategy

15 Materiality / Risk Identification

16 Goals

17 Governance & Executive Engagement

18 Incentives

19 People & Tools

20 Stakeholder Engagement

21 Employee Engagement

22 Funding Mechanisms

23 Business Innovation Mechanisms

24 Visibility

25 Metrics & Measurement

26 Reporting & Communicating

27 Point-of-Purchase Consumer Education

28 Marketing Campaigns

29 Collaborative Involvement

30 Retail Operations

31 Stores / Corporate Offices

32 Warehouses / DCs

33 Data Center & Applications

34 Supply Chain

35 Transportation / Logistics

36 Supplier Engagement

37 Supply Chain Transparency & Traceability

38 Products

39 Product & Packaging Design and Development

40 Owned Manufacturing / Production

41 Product & Packaging End-of-Life Stewardship

42 Environmental Issues

43 Energy & GHG Emissions

44 Water & Wastewater

45 Waste & Recycling

46 Chemicals & Toxics


Maturity Comparison Across All DimensionsA snapshot of the 2015 average and leaders' programs across all maturity dimensions is presented below.

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2015 Average Maturity 2017 Prediction 2015 Leader

Pro

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Next practice

Leading

Excelling

Standard

Starting


Strategy & CommitmentThe first critical steps toward achieving the desired outcomes of any business program is a strategy that reflects the company's priorities, operating environment, assets, and challenges; as well as strong senior executive commitment.

In this section:

Dimension 1 | Strategy

Dimension 2 | Materiality / Risk Identification

Dimension 3 | Goals

Dimension 4 | Governance & Executive Engagement

Dimension 5 | Incentives


Overview

Key Findings:

The industry's maturity

Example resources to improve

• Sustainability SWOT framework • Kroger • ISO 50001 Energy Management System Standard

• Retail Sustainability Management Maturity Matrix • UN Global Compact

• Ceres Roadmap for Sustainability

Business programs can only be effective with a strategy that makes the best use of company resources, and addresses the material issues with the greatest potential for

business, environmental, and societal outcomes.

2015 Leader2017 Prediction

Dimension 1 | Strategy

2015 Average

- This dimension currently ranks as one of the most mature dimensions for the industry, and is planned to be one of the most ma ture in 2017- Both large and medium format retailers plan to grow signficantly in this dimension in the next two years

622

9 3 11 2

25

8 5

2015 Maturity 2017 Predictions

• Ad hoc efforts, no formal sustainability program or program relies on volunteers only

• Defined sustainability team with responsibilities on short and long-term sustainability strategy

• Sustainability strategy is primarily focused on operational priorities rather than sourcing or merchandizing practices

• Defined sustainability team aligns with various key departments on sustainability strategy for the short-and long-term

• Sustainability strategy encompasses operations, and merchandizing and sourcing practices

• Sustainability strategy aligns across departments and with overall corporate strategy

• Incorporates internationally recognized standards (e.g., UNGC, SA8000, etc.) into long-term organizational strategy

• Balanced scorecard (people, planet, and profit) system in place for reviewing strategies and projects

• Sustainability strategy and corporate strategy are one and the same

• Sustainability strategy / results regularly reported to executives and the board

• CEO regularly incorporates sustainability strategy in meetings and communications (e.g. employee town halls / investor calls, etc.)


http://www.wri.org/publication/sswot

http://sustainability.kroger.com/index.html

http://www.energy.gov/eere/amo/iso-50001-energy-management-standard

http://www.rila.org/sustainability/RetailEnergyManagementProgram/Pages/MaturityMatrix.aspx

https://www.unglobalcompact.org/AboutTheGC/index.html

http://www.ceres.org/roadmap-assessment/

Overview

Key Findings:



• GRI Materiality • Gap • Sustainability Accounting Standards Board

• Return on Reputation for the Retail Industry • adidas • Ceres

Defining the issues most material to the business is critical for all corporate functions; and resources are best directed at those issues with the potential for a significant

material impact.


Dimension 2 | Materiality / Risk Identification

2015 Average

- The industry on average plans to make significant improvement over the next two years in this dimension- Large format retailers plan to grow signficantly in this dimension in the next two years

2215

1 2 10

19 163 3


• Ad hoc efforts to identify sustainability risks and opportunities

• Assesses risks and opportunities through a formal materiality process

• Assesses risks and opportunities and conducts bi-annual review

• Assessment incorporates a timeframe of 3-6 years

• Individual departments (e.g., sourcing, operations) review materiality assessment

• Uses the same processes to review sustainability risks and opportunities as corporate risks and opportunities

• Assessment incorporates a timeframe of more than 6-10 years

• Integration of sustainability and corporate risks

• Assessment incorporates a timeframe of more than 10 years


https://www.globalreporting.org/reporting/G3andg3-1/guidelines-online/TechnicalProtocol/Pages/MaterialityInTheContextOfTheGRIReportingFramework.aspxhttps:/www.globalreporting.org/reporting/G3andg3-1/guidelines-online/TechnicalProtocol/Pages/MaterialityInTh

http://www.gapinc.com/content/csr/html/company-overview/reporting-and-materiality.html

http://www.sasb.org/

http://www.apcoworldwide.com/docs/default-source/default-document-library/ROR/ror-retail-executive-summary.pdf

http://www.adidas-group.com/en/sustainability/managing-sustainability/materiality-analysis/

https://www.ceres.org/resources

Overview

Key Finding:



• PivotGoals • Eileen Fisher • RILA's Retail Sustainability Initiative

• WWF's The 3% Solution • Staples

• Power Forward

Goals signal commitment, and drive focus and internal alignment. Some companies prefer to perform rigorous analysis before setting goals that they are certain to achieve,

while others opt for ambitious goals to inspire employees to action. And some companies choose internally-facing goals, while others see value in publicly promoting them.

2017 Leader2015 Leader2017 Prediction

Dimension 3 | Goals

2015 Average

Both large and small format retailers plan to grow signficantly in this dimension in the next two years

1025

4 2 018

228 2


• Annual goals based on cost saving only

• No efforts in place to benchmark sustainability goals against peers

• Short- and long-term sustainability goals, mostly focused on operations

• Efforts in place to benchmark sustainability goals against peers

• Identifies absolute reduction goals for two or more material risk categories (i.e., energy consumption, water, waste/recycling, sourcing, consumer education)

• Routine and comprehensive benchmarking efforts in place to prioritize focus areas

• Defines comprehensive, aggressive, and cross-functional goals addressing all material risk categories

• Goals address most aspects of sustainability

• Includes separate goals focused on supply chains, products, sourcing, and marketing

• Uses global and local context of environmental conditions and aligns with science-based targets to set appropriate goals

• Quantitatively links profit goals with sustainability goals


http://www.pivotgoals.com/

http://www.eileenfisher.com/EileenFisher/Behind_the_Label/Vision2020.jsp

http://www.rila.org/sustainability/Pages/SustainabilityHome.aspx

http://www.worldwildlife.org/projects/the-3-solution

http://www.staples.com/sbd/cre/marketing/about_us/renewable-energy-efficiency.html

https://www.worldwildlife.org/publications/power-forward-why-the-world-s-largest-companies-are-investing-in-renewable-energy

Overview

Key Finding:



• Governance for Sustainability

• RILA's Retail Horizons

• Ceres Roadmap for Sustainability

Strong governance structures ensure buy-in from company leadership and focus the program's efforts. Further, program execution is more streamlined with engaged

executives who can direct their teams and resources as appropriate.

• Best Buy

• Marks and Spencer


Dimension 4 | Governance & Executive Engagement

2015 Average

Large and medium format retailers, and grocers, plan to progress the most in this dimension in the next two years

16 18

4 2 11

13 1510

2


• Ownership and accountability for sustainability has either not been defined or is confined to one function (e.g., Environmental Health and Safety)

• No sustainability council in place

• Dedicated sustainability executive to design, manage, and continuously improve sustainability program and initiatives

• Sustainability council comprises senior leaders from key functional roles and meets periodically

• Accountability is clearly defined for sustainability goals and initiatives

• Board and company leadership develop and/or endorse goals and initiatives to improve sustainability

• Sustainability council comprises executives, defines priorities, and periodically reports to senior leaders

• Senior management's sustainability roles are clearly defined

• Board oversees and endorses sustainability goals and initiatives

• Dedicated executive champion for sustainability appointed by board

• Executives from all of the relevant parts of the business are engaged (e.g., strategy, innovation, finance, HR, legal, marketing, sourcing)

• Board and key executives held accountable for sustainability performance

• Dedicated Chief Sustainability Officer reports directly to CEO

• CSO & CEO partner to demonstrate business relevance of program to investors and other stakeholders


https://www.ic.gc.ca/eic/site/csr-rse.nsf/eng/h_rs00577.html

http://www.rila.org/sustainability/future/Pages/default.aspx

http://www.ceres.org/roadmap-assessment/about/roadmap-expectations/governance-for-sustainability

https://corporate.bestbuy.com/wp-content/uploads/2014/06/csr-2014-final.pdf

http://planareport.marksandspencer.com/downloads/M%26S-PlanA-2014.pdf

Overview

Key Finding:



• Incentivizing and Valuing Employee Engagement

Incentives drive all business behavior. Implementing programs will be more streamlined when the proper organizational, management, and employee incentives are

aligned for achieving sustainability objectives.

• Loblaw


Dimension 5 | Incentives

2015 Average

This dimension is one where nearly all companies are just starting

2712

1 0 12

28

8 2 1


• Sustainable business and leadership practices do not factor into annual evaluations and compensation

• Performance evaluation and compensation considers multiple "balanced" goals and performance metrics Include basic sustainability goals for select leaders as part of metrics

• Includes sustainability metrics in annual reviews and performance ratings for each business function

• Rewards (monetary or non-monetary) biggest contributions to sustainability performance

• Reviews mid-level management processes regularly and links it to sustainability performance

• Provides some incentives to influence positive personal behaviors for all employees (e.g., hybrid car or mass transit subsidy)

• Links executive compensation to sustainability performance

• Invests in incentives to influence positive employee behaviors (e.g., charging stations for electric vehicles at store or office parking lots)


http://www.sustainablebrands.com/digital_learning/audio/incentivizing-and-valuing-employee-engagement

http://www.loblaw-reports.ca/responsibility/2011/index.php#2011-targets-respect

People and ToolsAn appropriate amount of resources, mainly in the form of personnel, funding, tools, and stakeholder input, is critical in order to execute business priorities. A strong strategy and senior executive commitment can unlock access to resources that can drive a successful program.

In this section:

Dimension 6 | Stakeholder Engagement

Dimension 7 | Employee Engagement

Dimension 8 | Funding Mechanisms

Dimension 9 | Business Innovation Mechanisms


Overview

Key Finding:



• Making Stakeholder Engagement Meaningful • Coca-Cola • The Future of Stakeholder Engagement

• 10 Tips for Activists When Engaging Companies • Nike

• 10 Tips for Stakeholder Engagement

If properly engaged, stakeholders—from customers to investors to nonprofits and government—can be a sustainability program’s greatest ally. Those stakeholders have

valuable perspectives, expertise, resources, and more that can greatly benefit companies.


Dimension 6 | Stakeholder Engagement

2015 Average

This dimension is one where nearly all companies are just starting

259 3 2 21

19 136 2


• Identifies key stakeholders • Identifies some stakeholder

concerns on a periodic basis but no defined method of proactive engagement

• Assesses stakeholder concerns systematically through materiality analysis

• Establishes and communicates methods of stakeholder engagement

• Addresses stakeholders concerns through materiality analysis and identifies some KPIs from the process

• Builds relationships with key stakeholders

• Identifies comprehensive list of KPIs through stakeholder engagement process

• Establishes and communicates methods of stakeholder engagement by type and stakeholder group, including frequency of engagement

• Incorporates feedback from key stakeholders into sustainability strategy

• Consistently monitors and reports publically on KPIs identified through stakeholder engagement


http://www.bsr.org/reports/BSR_Five-Step_Guide_to_Stakeholder_Engagement.pdf

http://www.coca-colacompany.com/sustainabilityreport/our-reporting/stakeholder-engagement.html

http://www.bsr.org/en/collaboration/groups/future-of-stakeholder-engagement

https://www.future500.org/10-tips-activists-engaging-companies/

http://www.nikeresponsibility.com/report/content/chapter/stakeholder-engagement-reporting

https://www.future500.org/top10stakeholderengagement/

Overview

Key Finding:



• PwC Employee Engagement • Nestle • Green Office Challenge-Chicago

• GreenBiz Employee Engagement • RILA Retail Employee Engagement Report

Company employees are the lifeblood of the organization; nothing will be accomplished without engaged employees from across the company. Further, the store

associates are also the direct connection to customers, so getting them excited about sustainability can energize customers.


Dimension 7 | Employee Engagement

2015 Average

Small format retailers plan to grow the most in this dimension in the next two years

17 18

4 2 01

14 17

72


• Educates through basic environmental-awareness signage in stores

• Develops store sustainability team(s) or sustainability advocates to monitor on-site performance and provide feedback to corporate sustainability team

• Solicits sustainability suggestions from corporate employees

• Hosts events for corporate employees to learn about sustainability in their retail roles and in their home (e.g., Earth Month events)

• Posts store sustainability performance (e.g., energy consumption, waste/recycling generation) for all store associates to compare their store to other similar stores

• Develops and maintains online platform for employees to review store & company sustainability performance and submit ideas to reduce environmental footprint

• Provides collaborative forum for high-initiative employees to receive recognition for their sustainability efforts while sharing best practices with colleagues

• Holds highly visible senior leadership meetings on sustainability where store employees, sourcing, merchants, logistics, and other staff are recognized

• Regularly educates employees on company sustainability vision and business case to underscore relevance to employee daily work

• Trains in-store employees to educate customers about company’s sustainability/eco-awareness efforts


http://www.sustainablebrands.com/digital_learning/leadership/keys_corporate_responsibility_employee_engagement

http://www.nestle.com/csv/our-people/training-learning

http://greenpsf.com/go/community/about/chicago

http://info.greenbiz.com/rs/greenbizgroup/images/sustainability-employee-engagement.pdf?mkt_tok=3RkMMJWWfF9wsRojvqnIZKXonjHpfsX86espXK%2BwlMI/0ER3fOvrPUfGjI4FRMtkI%2BSLDwEYGJlv6SgFSLHEMa5qw7gMXRQ%3D

http://www.rila.org/sustainability/Documents/Employee Engagement/2012 Employee Engagement for Sustainability Report.pdf

Overview

Key Finding:



• Energy Project Evaluation & Guide Usage • Kohl's • Funding and Financing for Energy Projects

• Energy Funds-Best Practices

Access to capital for resources and projects is a critical component in any corporate initiative. Sustainability can drive business value, but it needs to be measured in

financial terms in order to demonstrate that value and receive funding and support.


Dimension 8 | Funding Mechanisms

2015 Average

This dimension is the one where most companies plan to be "excelling" in 2017

7

259

0 018

28

4 0


• Minimal funding dedicated for sustainability programs

• No mechanism to track ROI of sustainability efforts

• Ad-hoc funds for sustainability programs (e.g., energy efficiency, recycling programs, marketing, etc.)

• Conducts some adjustment of ROI on internal projects to account for sustainability metrics

• Dedicated fund for sustainability programs (e.g., energy efficiency initiatives, recycling programs, etc.)

• Key retail functions include sustainability budgeting (e.g., distribution, sourcing, merchandizing, store operations)

• All corporate funding requests routinely include relevant sustainability metrics

• ROI of projects considers total cost of ownership and reputational value

• Corporate funding requests always include sustainability metrics relevant to the division or business unit

• Sustainability related funding on an upward trajectory over time


http://www.legrand.us/aboutus/sustainability/project-evaluation-download.aspx#.VRL6_vnF_6K

https://www4.eere.energy.gov/challenge/implementation-model/kohls

http://energy.gov/funding-financing-energy-projects

http://www.greenbiz.com/article/10-best-practices-corporate-energy-funds

Overview

Key Finding:



• Sustainable Innovation • Nike • Network for Business Innovation and Sustainability

• Model Behavior

As the retail industry is undergoing profound changes—resulting from changing demographics, new consumption patterns, technologies, big data, transparency, and

more—retailers must innovate. Sustainability provides a valuable frame in which to assess long-term trends and identify critical innovations.


Dimension 9 | Business Innovation Mechanisms

2015 Average

Nearly half of the respondents indicate that they will be "excelling" in this dimension in 2017

19 136 2 13

1320

3 2


• No specific channels in place to invest in sustainable innovation (e.g., 3D printing, RFID innovations, mobile, etc.)

• Innovation mechanisms in place - sustainability is a criteria but not weighted to receive favorable score

• Innovation mechanisms in place to invest in sustainable innovations

• Solicits ideas from employees, suppliers, and external stakeholders

• Dedicated team to create and invest in sustainable innovations

• Innovation fund and dedicated team in place to invest in retail innovation around sustainability

• Chief Innovation Officer incorporates sustainability and continuous improvement into goals


http://www.sustainablebrands.com/digital_learning/research_report/brand_innovation/sustainable_innovation_exploring_new_innovation_pa

http://www.nikeresponsibility.com/report/content/chapter/our-sustainability-strategy

http://nbis.org/

http://www.sustainability.com/library/model-behavior

VisibilityWhile successfully executing on business priorities is the most important step, visibility is critical inorder for senior executives and outside stakeholders to assess a program's progress and recognize a program's benefits. Metrics, measurement, reporting, and marketing all contribute to ongoing visibility campaigns.

In this section:

Dimension 10 | Metrics & Measurement

Dimension 11 | Reporting & Communicating

Dimension 12 | Point-of- Purchase Consumer Education

Dimension 13 | Marketing Campaigns

Dimension 14 | Collaborative Involvement


Overview

Key Finding:



• UNEP Sustainability Metrics • Macy's • Sustainable Packaging Framework Project

• Global Protocol on Packaging Sustainability

Every strong business program or initiative requires metrics to define success and track progress. Those metrics should align to both the goals of the program and the

whole organization; and should be periodically measured and shared with relevant stakeholders across the organization and outside.


Dimension 10 | Metrics & Measurement

2015 Average

This dimension currently ranks as one of the most mature dimensions for the industry

2

27

101 10 5

259

2


• No defined metrics for sustainability

• Limited set of sustainability metrics; focused mainly on operations

• Basic Excel spreadsheets used to track metrics

• Sustainability metrics focused on only certain aspects of sustainability

• Metrics informed by materiality assessment and aligned to global frameworks (e.g., GRI, IIRC, SASB)

• Sustainability metrics tracked for some regions of the global business

• Measurement tools track metrics

• Sustainability metrics focused on all material aspects; including innovation

• Sustainability metrics tracked for all of the most relevant regions of the global business

• Automated measurement tools; IT systems in place to periodically track the majority of sustainability metrics

• Comprehensive metrics defined to cover all aspects of sustainability; linking people & planet with profit

• Material metrics chosen from most global frameworks with rationale for metric selection clearly communicated

• Metrics captured consistently across entire organization, globally


http://www.unepfi.org/fileadmin/documents/UNEPFI_SustainabilityMetrics_Web.pdf

http://www.macysinc.com/assets/docs/social-responsibility/2012-report-on-social-responsibility.pdf

http://www.sustainablepackaging.org/content/?type=5&id=sustainable-packaging-metrics

http://www.theconsumergoodsforum.com/download-global-protocol-on-packaging-sustainability-gpps

Overview

Key Findings:



• GRI Resource Library • Whole Foods • GRI Network

• Carbon Disclosure Project • Best Buy

More than ever before, customers, investors, regulators, and others are looking for metrics and qualitative stories about retailers’ sustainability efforts. Reporting and rating

systems have been developed to help companies report on their sustainability impacts and compare them against one another.


Dimension 11 | Reporting & Communicating

2015 Average

15 13 11

1 10

15 18

62


• Regularly published report contains cursory mention of sustainable business practices

• Some limited sustainability/CSR information is available on website (e.g., a webpage, or grouped with corporate philanthropy)

• Company either publishes a sustainability report on a regular basis, or provides detailed webpages covering all aspects of sustainability

• Sustainability report includes both quantitative metrics and qualitative stories

• Sustainability information is readily accessible in multiple formats and sustainability goals publicly articulated and tracked

• Includes a balanced and honest discussion of challenges as well as progress

• Discloses climate change, water, or forest-risk impacts as part of the CDP

• Scores in top 10% of industry peers in sustainability measures and indices (e.g., Dow Jones Sustainability Index, Carbon Disclosure Project)

• Uses 3rd-party standards (e.g, GRI) Sustainability statements are independently audited

• Communicates sustainability programs in multiple, accessible formats (e.g., websites, product marketing and labeling, advertising)

• Scores in top 5% of industry peers in sustainability measures and indices (e.g., Dow Jones Sustainability Index, Carbon Disclosure Project)

• Uses integrated reporting • Focused multi-channel

sustainability campaign with features such as an interactive sustainability website

• Communicates sustainability as integrated with brand ethos


https://www.globalreporting.org/Pages/resource-library.aspx

http://www.wholefoodsmarket.com/sites/default/files/media/Global/PDFs/2012GreenMissionReport.pdf

https://www.globalreporting.org/NETWORK/Pages/default.aspx

https://www.cdp.net/en-US/Respond/Pages/companies.aspx


Overview

Key Finding:



• Marks and Spencer

• Walmart Sustainability Leaders

Consumers now are seeking more “sustainable” products, especially as that relates to certain product categories. But of course they are using terms they can relate to, like

healthy, natural, local, organic, non-toxic, energy efficient, recyclable, etc. Providing information about product attributes can drive loyalty and sales.


Dimension 12 | Point-of-Purchase Consumer Education

2015 Average

Respondents identified this dimension as one that will grow the least in the next two years

17 17

7

0 03

18 17

30


• Few products are explicitly designed to reduce negative environmental impacts

• Limited education for consumers to learn about sustainability dimensions of products

• Some specifically designated products offered have sustainability benefits; ad hoc communication on the benefits of those products

• High percentage of products offered have specific sustainability benefits; regular communication on the benefits of those products

• Provides some information or tips to consumers to use products/services in a responsible way (e.g., "Please recycle this cup when finished", "Wash this garment in cold water")

• Dedicated online storefronts encourage consumers to select products with sustainability benefits

• Provides consumers with tools or incentives for sustainable behavior change and actively engages with the consumer even after the purchase (via website, product packaging, etc.)

• Significant in-store signage or sections dedicated to products with advanced sustainability benefits

• Engages consumers about products with sustainability benefits (e.g., catalogs, web filters, icons, online calculators, product stories)

• Actively engages with customer even after the purchase (via website, product packaging, etc.) to mitigate any environmental impact of products

• Most own-brand products have advanced sustainability benefits, and communicate benefits on packaging


http://www.sustainablebrands.com/digital_learning/event-video/marks-and-spencers-consumer-education-empowerment-strategy-mike-barry

http://www.walmart.com/cp/Sustainability-Leaders/1229461

Overview

Key Findings:



• Green Biz-Sustainability Marketing

Marketing is the fundamental channel between retail brands and consumers. So as consumers increase their demand for more "sustainable" products—whether that's

healthy, natural, local, organic, non-toxic, energy efficient, recyclable, or other product attributes—marketing those attributes will grow in importance.

• Levi's


Dimension 13 | Marketing Campaigns

2015 Average

- Respondents identified this dimension as one where nearly the most number of companies are just starting- Small format retailers plan to grow signficantly in this dimension in the next two years

23 171 0 04

16 183 0


• Ad hoc sustainability-related marketing campaigns

• Regular sustainability-related marketing programs

• Tend to focus on specific themes or times (e.g. Earth Day)

• Ongoing efforts and funding related to marketing sustainable products and services

• Dedicated sustainability focused marketer within marketing team

• Marketing effectiveness metrics focus on reputation/brand value

• Significant marketing budgets for sustainability-related marketing

• Marketing effectiveness metrics include financial ROI


http://www.greenbiz.com/blog/2013/10/17/your-most-powerful-marketing-tool-your-sustainability-story

http://www.adweek.com/news/advertising-branding/green-new-black-levi-s-nike-among-marketers-pushing-sustainability-153318

Overview

Key Findings:



• Collaboration and Leadership for Sustainability • Best Buy • RILA Retail Sustainability Initiative

• The Lego Group • The Sustainability Consortium

• The Sustainable Apparel Coalition

While some aspects of sustainability performance lead to a competitive advantage for a retailer, there are often opportunities to work together to benefit not only the

collaborators, but also consumers and the environment. Additionally, often sustainability performance can be enhanced more efficiently through a collective effort.


Dimension 14 | Collaborative Involvement

2015 Average

- This dimension currently ranks as one of the most mature dimensions for the industry, and is estimated to be one of the most mature in 2017- Both large format retailers and grocers are currently most mature in this dimension

3

14 139

217

159 9


• Does not formally engage with peers on sustainability issues

• Actively shares sustainability information with peers

• Member of one or more industry associations focused on sustainable supply chain issues

• Actively collaborates with peers to make positive impact within industry

• Premier member of one or more industry associations or multi-lateral groups focused on relevant sustainability issues

• Partners with NGOs, governments, academia, or other institutions to identify improvement opportunities

• Takes a leadership role in developing new tools or capabilities that will enable peers to improve sustainability impact

• Takes a leadership role in developing new tools or capabilities that will enable entire value chains to improve sustainability performance


http://sloanreview.mit.edu/projects/joining-forces/?utm_source=BCG&utm_medium=referral&utm_campaign=susrpt14


http://www.rila.org/sustainability/Pages/SustainabilityHome.aspx

http://www.lego.com/en-gb/aboutus/responsibility/ourstories/a-climate-savers-partner

http://www.sustainabilityconsortium.org/who-we-are/

http://www.apparelcoalition.org/

Retail OperationsRetail operations relate to a company's physical infrastructure -- from stores and corporate offices, to distribution centers and data centers. This infrastructure consumes energy and generates wastes, and therefore pose eco-efficiency opportunities.

In this section:

Dimension 15 | Stores / Corporate Offices

Dimension 16 | Warehouses / DCs

Dimension 17 | Data Center & Applications


Overview

Key Findings:



• RILA’s Green Lease Primer • Starbucks • USGBC

• USGBC Calculators • Walgreens • RILA's Retail Energy Management Program

• Green Lease Library • DOE's Better Building's Alliance

Retail facilities often represent the main environmental impacts that are directly under the company's control. Stores are the major touch-point for customers; and corporate

offices for the headquarter employees. Therefore it is necessary to focus on energy, water, and waste reduction at those facilities.


Dimension 15 | Stores / Corporate Offices

2015 Average

This dimension currently has the most number of "standard" performers, but is a dimension where many companies plan to be "excelling" in 2017

3

30

70 10

1123

6 1


• Construction, renovation, and leasing decisions adhere to local regulations, but little or no 'green' standards

• Environmental impact, energy use, and occupant health are only minor considerations

• Incorporates some 'green building' opportunities into construction, renovation, or leasing projects

• Opportunities are limited to lower-cost options (e.g., efficient toilets, faucets, light bulbs, and ceiling fans; recycled / reclaimed flooring; low-VOC paint)

• Small percent of facilities have ENERGY STAR or LEED certification

• Routinely incorporates sustainability metrics into construction, renovation, and leasing decisions

• Accounts for sustainability factors (e.g., recycling infrastructure, alternative transportation for customers, etc.) in store site selection

• Higher percent of facilities have ENERGY STAR or LEED certification

• Majority of store site incentivizes customers to practice sustainable behaviors (e.g., premium parking spaces for hybrid or electric vehicles)

• At least half of facilities have ENERGY STAR or LEED certification

• Implements smart landscaping at some store and warehouse sites to improve water efficiency

• Green building and certification (LEED, BREEAM, Living Building Challenge, EPA ENERGY STAR, etc.) is expected on all projects, except in extreme cases

• Routinely employs smart landscaping, solar panels, wind turbines, or other technologies in the design and construction of new stores, and warehouses


http://www.rila.org/sustainability/issues/Pages/RetailGreenLeasePrimer.aspx

http://www.starbucks.com/responsibility/global-report/environmental-stewardship/green-building

http://www.usgbc.org/community

http://www.usgbc.org/resources/list/calculators

http://news.walgreens.com/presskits/net-zero-store.htm

http://www.rila.org/sustainability/RetailEnergyManagementProgram/Pages/default.aspx

http://www.greenleaselibrary.com/

https://www4.eere.energy.gov/alliance/node/9

Overview

Key Findings:



• Best Practices in Warehouse Efficiency

• ENERGY STAR Portfolio Manager - Warehouses

In addition to stores and corporate offices, warehouses and distribution centers are often in the control of retailers (though in many cases they are leased spaces). Due to

their size, there are a lot of opportunities to improve the environmental performance of these facilities.

• Prologis


Dimension 16 | Warehouses / Distribution Centers

2015 Average

- This dimension currently ranks as one of the most mature dimensions for the industry- Large format retailers plan to be further ahead on this dimension in two years

3

249 5 01

820

8 4


• Storage facilities do not employ any eco-efficient technologies or practices

• Emissions are compliant but not fully contained and inventoried

• Programs are in place to minimize waste and improve work flow

• Upgrades moving technologies (forklifts, automated belts, etc.) with energy-efficient power sources

• Installs low-energy lighting, HVAC, and refrigeration equipment

• Redesigns warehousing facilities in order to optimize space and reduce energy consumption

• Continuously minimizes footprint and resource consumption to create best uses for storage space and replaces non-sustainable products

• Regularly adds new technology to reduce energy consumption in moving and storing goods within warehouses

• Incorporates green standards for all new warehousing to minimize energy and safety costs

• Incorporates green standards for all new warehousing or retrofits existing warehousing to minimize energy and safety costs

• Develops partnerships with customers, upstream processes, and transportation vendors to maximize flow of goods through facilities while minimizing waste


http://business.edf.org/projects/best-practices-in-warehouse-efficiency/

http://www.energystar.gov/sites/default/files/tools/Warehouse.pdf

http://www.nrel.gov/docs/fy14osti/57263.pdf

Overview

Key Finding:



• ENERGY STAR Data Centers • Verizon • National Data Center Efficiency Program

• DOE Data Centers and Servers • Apple

Data centers are one of the fastest growing consumers of energy in the U.S. While they currently only represent a small fraction of retailers' impacts, they will be

increasingly important as retailing continues to move to internet-enabled platforms like the internet and mobile devices.


Dimension 17 | Data Center & Applications

2015 Average

Respondents identified this dimension as one that will not significantly grow in maturity in the next two years, likely becau se it is a minimal component of retailers' environmental impacts

17 22

2 0 0520 14

2 0


• Application development has little or no awareness of potential techniques for greening

• Does not consolidate applications

• Sizing and layout of owned or contracted data center infrastructure is ad hoc and geared towards meeting current needs

• There are no explicit decisions around green IT considerations

• Reduces redundant functions in inventory of applications

• Employs some efforts to consolidate applications

• Takes advantage of new efficiency methodologies in application development

• Identifies and monitors some green metrics around power, cooling, and airflow

• Considers and tracks green impact along with other business objectives in data center

• Shares applications and related platforms across business units

• Software development lifecycle regularly uses new efficiency technologies (e.g., virtualization, SOA and other sharing and flexible technologies)

• Follows green technology standards throughout organization

• Fully leverages enterprise software across the organization to maximize use/capabilities

• Actively tracks green metrics against business green objectives

• Participates in ENERGY STAR recognition program for energy efficient data centers

• All data center build outs or contracts must pass through a rigorous green evaluation process before approval

• Seeks to improve ENERGY STAR scores for all data centers

• Employs effective 'big data' strategies to analyze sustainability data and metrics


http://www.energystar.gov/index.cfm?c=prod_development.server_efficiency

http://www.energystar.gov/ia/products/power_mgt/VerizonCaseStudy.pdf?1a55-4291

http://www.energystar.gov/ia/partners/prod_development/downloads/NDCFactSheet.pdf?18d4-b6e9

http://www.energy.gov/eere/buildings/data-centers-and-servers

http://www.apple.com/environment/our-progress/

Supply ChainOne of retailers' most critical strengths lies in efficiently transporting goods around the globe and to retail stores just when they are needed. Further, they often interact with product suppliers to ensure that their product requirements are being met.

In this section:

Dimension 18 | Transportation / Logistics

Dimension 19 | Supplier Engagement

Dimension 20 | Supply Chain Transparency & Traceability


Overview

Key Finding:



• DOE's Vehicle Technology • FedEx • Workplace Charging Challenge

• EDF's Green Fleet • EPA SmartWay Program

• EPA SmartWay Resources

Fast and efficient logistics systems allow retailers to ship goods to stores and even to customers' homes at low cost. Since fuel consumption is the largest contributor to the

environmental impact of transportation, retailers have a keen interest in reducing its use and associated costs.


Dimension 18 | Transportation / Logistics

2015 Average

Nearly half of the respondents indicate that they are currently "standard" in this dimension

920

9 3 03 918

8 3


• Aware of impact of transportation decisions on the environment

• No precision or baseline emission measurements

• Does not implement sustainable transportation initiatives or they are in early planning stages

• Employs improved blend of rail, road, and air transportation modes

• Includes capacity management as a criteria in managing distribution

• Uses or tests some alternative fuels in transportation vehicles

• Participates in EPA SmartWay

• Packaging and transportation system designs concurrently occur to optimize flow of goods and minimize space and energy usage

• Develops innovative shipping mechanisms to maximize load capacity

• Uses reusable containerization for nearly all products

• Recognized EPA SmartWay Carrier & Shipper with a highly ranking score

• Demonstrates reduction of environmental impact by optimizing transportation & warehouse network

• Replaces vehicle fleet with 'green vehicles'

• Considers emissions when selecting transportation vendors

• Forms transportation alliances to maximize load capacity and minimize waste

• Recognized excellence in reducing environmental impact from transportation strategies


http://www.energy.gov/eere/transportation/vehicles

http://business.edf.org/projects/featured/past-projects/edf-and-fedex-driving-toward-cleaner-trucks/

http://www.energy.gov/eere/vehicles/ev-everywhere-workplace-charging-challenge

http://business.edf.org/projects/featured/past-projects/five-step-green-fleet-framework/

http://www.epa.gov/smartway/about/index.htm

http://www.epa.gov/smartway/about/outreach.htm

Overview

Key Findings:



• RILA Supplier Engagement Report • IKEA • CDP Supply Chain

• Target

While the environmental impacts in product supply chains are often not in the direct control of retailers, many work with product manufacturers to reduce the energy, water,

and material use, and waste and wastewater generated during production.


Dimension 19 | Supplier Engagement

2015 Average

- The industry plans for this dimension to be one of the top performing in two years- Both large and medium format retailers plan to progress the most in this dimension in the next two years

2114

1 2 31

1810 9 3


• Does not explicitly consider sustainability dimensions in sourcing process

• Supplier code of conduct addresses various environmental aspects, but may be missing certain key attributes from recognized industry standards (e.g., SA8000)

• Audits suppliers according to a risk profile or in response to problems

• No formal internal management system for tracking audits and remediation steps

• Incorporates key sustainability considerations into initial supplier onboarding and ongoing sourcing decisions

• Supplier code of conduct incorporates all dimensions of recognized industry standards

• Delivers some training or guidance to suppliers on sustainability opportunities

• Performs mix of internal and external audits on a regular basis according to supplier risk profile

• Works closely with suppliers to remediate sustainability issues

• Assesses all suppliers according to sustainability criteria

• Supplier code of conduct includes measurable sustainability metrics that auditors can objectively check against

• Tracks supplier sustainability performance quantitatively over time

• Actively collaborates with suppliers to capture shared savings through improvements in sustainability performance

• Sourcing/merchandise teams use sustainability scorecards as integral part of sourcing decisions

• Hosts annual "Sustainability Summit” with key suppliers/vendors

• Encourages vendors to improve and report on sustainability metrics (e.g. energy, waste, water) of their products, possibly leveraging services like CDP Supply Chain

• Works closely with suppliers to monitor subcontracting arrangements

• Encourages sustainable manufacturing practices for all products and suppliers

• Employs in-house team of expert auditors to check suppliers according to supplier risk profile

• Develops remediation plans in collaboration with supplier and closely monitors quantitative progress against them

• Relevant departments test and actively partner with research groups or vendors to design next generation equipment for sustainable performance

• Defines and executes on appropriate actions with suppliers failing to meet performance criteria


http://www.rila.org/sustainability/Documents/Product Supplier Engagement/2011 Product Supplier Engagement Report.pdf

http://www.ikea.com/ms/en_US/about_ikea/pdf/SCGlobal_IWAYSTDVers4.pdf

https://www.cdp.net/en-US/Programmes/Pages/Become-a-supply-chain-member.aspx

https://corporate.target.com/_media/TargetCorp/csr/pdf/Target-Sustainable-Product-Standard-7-15-14.pdf

Overview

Key Finding:



• Harvard's The Transparent Supply Chain • Walmart • The Sustainable Apparel Coalition

• Patagonia Footprint Chronicles • The Sustainability Consortium

• EICC Supply Chain Code of Conduct

Data on a product's make-up, the source of the raw materials and finished goods, and the manufacturing process, are increasingly valuable—to identify the product

lifecycle stages with the greatest impacts and opportunities for improvement. Transparency and traceability are enabling that exchange of critical data.


Dimension 20 | Supply Chain Transparency & Traceability

2015 Average

Respondents identified this dimension as one where nearly the most number of companies are just starting

2510

3 3 0618

10 6 1


• Does not publish any information on suppliers or country of origin beyond what is mandated by law

• Publishes some summary audit statistics (e.g., % of factories non-compliant) Publicly discloses where products are made (without factory-specific details)

• May disclose some anecdotal factory-specific information

• Makes audit results available publicly (e.g., through FLA)

• Supply chain information is available through a number of channels/media

• Publishes supplier code of conduct and summary of monitoring and enforcement mechanisms

• Efforts to trace supply chain from suppliers to subcontractors/vendors back to raw materials suppliers

• Active member of supply chain transparency organizations (e.g., CDP Supply Chain, TSC, SAC)

• Publishes summary audit statistics (e.g., % of non-compliant factories)

• Explains challenges in the supply chain through a number of channels (e.g., website, reports)

• Works with credible third parties to introduce sustainable best practices (e.g., FSC, MSC)

• Actively markets supply chain stories to consumers

• Publishes list of factories and locations, with stories, photographs, or other information on all key suppliers


https://hbr.org/2010/10/the-transparent-supply-chain

http://corporate.walmart.com/global-responsibility/ethical-sourcing/in-depth-factory-assessments

http://www.apparelcoalition.org/

http://www.patagonia.com/us/footprint/

http://www.sustainabilityconsortium.org/who-we-are/

http://www.eiccoalition.org/standards/code-of-conduct/

ProductsThe full lifecycle of products, from the initial design, to manufacture, to transportation and sale, poses the largest environmental footprint of all of retail's impacts. Therefore, it is critical to address those product-related impacts.

In this section:

Dimension 21 | Product & Packaging Design and Development

Dimension 22 | Owned Manufacturing / Production

Dimension 23 | Product & Packaging End-of- Life Stewardship


Overview

Key Finding:



• Global Protocol on Packaging Sustainability • McDonald's • Sustainable Packaging Coalition

• US EPA's Products/Packaging • UPS

• Product Sustainability Webinar

The design phase of product development may often be the best place to intervene to reduce a product's environmental impact, as this is the phase where the product's

materials, configuration, functionality, etc. is determined. That influences the manufacture, use of the product, and eventual disposal options—its full lifecycle.


Dimension 21 | Product & Packaging Design and Development

2015 Average

Nearly half of the respondents indicate that they are currently "standard" performers, but many companies plan to be "excelli ng" in 2017

16 20

3 2 0411

22

4 0


• Products are not measured for environmental impact and not designed to minimize use of materials, energy, water, and toxics

• Minimal attention given to packaging optimization

• Ad hoc measures employed to reduce product impacts such as the purposeful merchandizing of products using credible certifications (e.g., FSC, fair trade), and general pronouncements or guidelines to suppliers to minimize product and packaging impacts

• Employs credible criteria to evaluate sustainability performance of products representing > 30% of retail sales

• Collaborates with suppliers to identify, develop, and market product/service innovations that further reduce environmental impact

• Employs credible criteria to evaluate sustainability performance of products representing > 60% of retail sales

• Sets meaningful business-relevant revenue targets for product sustainability performance (e.g., 30% of sales will come from products that meet design criteria)

• Designs all products with a "cradle to cradle" outlook, using tools based on life cycle and hazard assessments

• Publicly reports on product sustainability goals and the net benefits of product sustainability performance


http://www.theconsumergoodsforum.com/download-global-protocol-on-packaging-sustainability-gpps

http://business.edf.org/projects/featured/past-projects/better-packaging-with-mcdonalds/

http://www.sustainablepackaging.org/

http://www.epa.gov/retailindustry/products/sustainability.html

http://business.edf.org/projects/featured/past-projects/ups-shipping-green/

http://www.sustainablebrands.com/digital_learning/slideshow/products_design/path_generating_business_value_product_sustainability

Overview

Key Finding:



• Business Case for Sustainable Manufacturing • REI • US EPA Life Cycle Assessments

• Safer Choice Product Manufacturing Resources • Eileen Fisher

While only a few retailers own manufacturing plants, the ones that do see opportunities to save costs through resource efficient operations. These manufacturing facilities

can often be some of the retailer's most energy and water intensive operations.


Dimension 22 | Owned Manufacturing / Production

2015 Average

Respondents identified this dimension as one that will not significantly grow in maturity in the next two years, likely because it is a minimal component of retailers' environmental impacts

27

9 3 1 113 11 13

3 1


• Basic understanding of sustainability principles and practices

• Sustainability principles have been incorporated to meet only regulatory requirements

• Develops plans and policies to make manufacturing processes more sustainable (including agricultural practices as applicable)

• Sets targets for key sustainability KPIs (e.g., waste, GHG, water) inclusive of raw material, manufacturing, and other production activities

• Measures against those targets and communicates success and improvement opportunities to facilities

• Benchmarks key environmental and social sustainability KPIs against industry standards and exceeds industry average

• Sets plans to achieve highly aspirational goals (e.g., 100% renewable power, zero waste, zero accidents)

• Uses renewable energy sources in most manufacturing processes with limited exceptions

• Achieves world class sustainability manufacturing / production levels

• Publicly report success against aspirational goals


http://www.epa.gov/sustainablemanufacturing/business-case.htm

http://www.rei.com/stewardship/sustainable-operations/product-impact.html

http://www2.epa.gov/saferchoice/learn-about-safer-choice-label

http://www2.epa.gov/saferchoice/resources-safer-choice-product-manufacturers

http://www.eileenfisher.com/EileenFisher/Behind_the_Label/Behind_the_Label/Organic_Fibers.jsp?bmLocale=en_US

Overview

Key Finding:



• The How2Recycle™ Label • Best Buy • Wrap Recycling Action Program

• US EPA Life-Cycle Assessments • Sears • EPA Responsible Appliance Disposal

• Product Stewardship Institute

Customers are increasingly concerned about the disposal of the products they purchase after their useful life, and environmental laws are increasingly targeting product

disposal. To respond, retailers are providing more options for responsibly handling those products.


Dimension 23 | Product & Packaging EOL Stewardship

2015 Average

Respondents identified this dimension as one that will not significantly grow in maturity in the next two years, likely becau se retailers do not have any major influence on product disposal

17 21

2 1 0615 17

3 0


• Products are not designed with their end-of-life in mind

• No recycling or product take-back initiatives available to customers

• Some limited mechanisms in place to design products that consider reuse or recyclability at end of their useful life

• Offers select recycling and product take-back bins in some retail locations

• Designs >20% of all products to consider reuse or recyclability of product at end of useful life

• Offers select recycling and product take-back bins are located in all retail locations

• Designs >40% of all products to consider reuse or recyclability of product at end of useful life

• Collaborates with other stakeholders (e.g., trade associations, civil society, competitors, value chain) for system change to upcycle/recycle product components

• Markets product take-back services to consumers and see as a competitive differentiator

• Begin designing and selling consumer services to mitigate the one-way consumption cycle

• Designs all products to consider reuse or recyclability of product at end of useful life

• Actively retrieves products at the end of their life for reuse and recycling

• Measures and reports the percentage of reclaimed products and their packaging materials for each product category


http://how2recycle.info/

http://www.bestbuy.com/site/global-promotions/recycling-electronics/pcmcat149900050025.c?id=pcmcat149900050025

http://www.plasticfilmrecycling.org/

http://www2.epa.gov/saferchoice/design-environment-life-cycle-assessments

http://www.sears.com/energystar-responsible-appliance-disposal/nb-120000000009505

http://www2.epa.gov/rad/guidance-existing-and-prospective-partners

http://www.productstewardship.us/?State_EPR_Laws_Map

Environmental ImpactsThe outcome of a robust sustainability strategy, executive and employee engagement, access to appropriate resources, and a visibility campaign results in improvements in a company's environmental performace.

In this section:

Dimension 24 | Energy & GHG Emissions

Dimension 25 | Water & Wastewater

Dimension 26 | Waste & Recycling

Dimension 27 | Chemicals & Toxics


Overview

Key Finding:



• Commercial Buildings Resource Database • Home Depot • RILA's Retail Energy Management Program

• Walmart • Better Buildings Alliance

Energy represents a significant operational expense for retail stores and therefore an opportunity for cost savings. New technologies, enhanced controls, and behavior

changes can result in large reductions in energy usage.


Dimension 24 | Energy & GHG Emissions

2015 Average

Over half of the respondents indicate that they are currently "standard" performers, but more than half of companies plan to be "excelling" in 2017

6

24

7 1 34 924

3 1


• No concerted strategies or policies to reduce energy consumption in retail portfolio

• Energy usage is not methodically measured or analyzed

• Traditional (non-renewable) energy sources are relied upon; no consideration of alternative energy sources

• Measures and analyzes current energy usage and future projections of retail portfolio in manual or fragmented way

• Outdated, inefficient equipment has been replaced

• Undertakes some investigation of alternative energy sources

• Currently draws less than 5% of energy use from alternative sources

• Develops coordinated energy efficiency policies across operations and value chain

• Designs and executes systematic energy management program (data tracking, training of relevant employees)

• Uses only energy efficient refrigeration equipment and tracks GHG emissions of equipment continually

• Capital expenditure decisions consider energy cost implications

• Relies on alternative energy for >25% of energy needs, through combination of RECs and onsite generation

• Relies on alternative energy for >40% of energy needs, through combination of RECs and onsite generation

• Joins external alliances to drive energy/climate policy


https://buildingdata.energy.gov/cbrd/

https://corporate.homedepot.com/CorporateResponsibility/Environment/Documents/Sustainability__Brochure_pages.pdf

http://www.rila.org/energy

http://corporate.walmart.com/global-responsibility/environment-sustainability/greenhouse-gas-emissions

https://www4.eere.energy.gov/alliance/node/9

Overview

Key Finding:



• US EPA Wastewater Management • Gap • EPA WaterSense

• EDF-AT&T-GEMI Water Efficiency Toolkit • Alliance for Water Efficiency

Water and wastewater are especially important to certain retail segments (e.g. those with grooming facilities or food preparation stations), companies with landscaping

needs, and stormwater run-off from paved surfaces. And retailers are raising the priority of water, considering the increased emphasis on addressing regional droughts.


Dimension 25 | Water & Wastewater

2015 Average

Over half of the respondents indicate that they are currently "standard" performers, but more than half of companies plan to be "excelling" in 2017

1323

3 2 04 924

3 1


• No concerted strategy to reduce water consumption in retail operations, product manufacturing or supply chain

• Measures current water usage of stores, warehouses, distribution centers and offices across some portion of the portfolio

• Conducts comprehensive water footprint across retail portfolio including stores, warehouses, distribution centers and offices to understand where impacts lie

• Efforts and technologies in place to minimize company's direct water usage, such as low-flow faucets

• Conducts comprehensive water footprint exercise across value chain, including stores, warehouses, distribution centers and offices and develops reduction strategy

• Efforts and technologies in place to recycle water Identifies water withdrawal sources and communicates localized risks

• Pursues innovative water reduction techniques such as grey water recycling, xeriscaping, storm water management, etc.

• Identifies water withdrawal sources and remediates any localized risks


http://water.epa.gov/polwaste/wastewater/index.cfm

http://www.gapinc.com/content/csr/html/environment/water.html

http://epa.gov/watersense/about_us/index.html

http://business.edf.org/projects/featured/water-efficiency-and-att/

http://www.allianceforwaterefficiency.org/

Overview

Key Findings:



• Waste Prevention and Recycling at the Office • Dean Foods • Closed Loop Fund

• Pepsico • Waste Management

Operational wastes at retail stores include cardboard, plastic shipping wraps, and a variety of other materials. While each local area has different abilities to recycle those

materials, the trend is toward more recycling, which can often represent a cost savings, or even new revenue, for retailers.


Dimension 26 | Waste & Recycling

2015 Average

- This dimension currently ranks as one of the most mature dimensions for the industry, and is estimated to be one of the most mature in 2017- Both large and medium format retailers plan to be farthest ahead on this dimension in two years

4

14 15

711 2

19 13

6


• Aware of main sources of waste generation in own company operations, product manufacturing and supply chain

• Little active efforts to reduce waste beyond required local regulations and limited recycling options

• Measures waste footprint of stores, warehouses, distribution centers and offices, across some portion of the portfolio

• Ad-hoc efforts to reduce and recycle waste at stores, warehouses, distribution centers and offices

• Measures waste footprint across retail portfolio including stores, warehouses, distribution centers and offices, comprehensively

• Implements waste minimization programs involving reduction, reuse, and recycling at stores, warehouses, distribution centers and offices

• Implements leading waste technologies and policies (e.g., balers for hard-to-recycle materials, customer recycling options)

• Waste reduction targets and continuous improvement method in place for products, supply chain and operations

• Commitment to zero waste goals at some retail locations

• Conducts comprehensive waste footprint exercise across value chain

• Efforts in place to completely remove hazardous waste from retail operations, product development and supply chain

• Commitment to zero waste goals across all locations


http://www.calrecycle.ca.gov/reducewaste/office/

http://responsibility.deanfoods.com/environmental-sustainability/solid-waste-recycling

http://www.closedloopfund.com/

http://www.pepsico.com/Purpose/Environmental-Sustainability/Packaging-and-Waste

http://www.wm.com/thinkgreen/recycling-business.jsp

Overview

Key Findings:



• US EPA Toxic Chemical Resources • Walmart • Green Chemical & Commerce Council

• Chemicals Management Module • US EPA Pesticide Pilot Project

• Sustainable Chemicals Management Report

Customers are increasingly asking about product ingredients to make informed purchasing decisions, and NGOs are becoming vocal about toxic chemicals. Chemicals,

whether a true or perceived hazard, are top of mind; and as a consequence, retailers are ever-more diligent about monitoring the ingredients in products.


Dimension 27 | Chemicals & Toxics

2015 Average

16 18

52 0

4

13 19

41


• Complies with minimum environmental regulations

• Maintains a list of regulated chemicals or a restricted substance list (RSL)

• Undertakes beyond-compliance measures to reduce the use of chemicals and toxics across the value chain

• Defines relevant metrics to monitor use of chemicals and toxins throughout value chain

• Defines goals around use of chemicals and toxics in products

• Understands sources of toxins throughout value chain and what's driving them

• Establishes green chemistry program with the goal of reducing toxics across the value chain

• Conducts comprehensive assessment of chemicals in products and processes, with an evaluation of hazard and exposure potential

• Establishes alliances with industry peers to further green chemistry innovation

• Communicates green chemistry policies to suppliers


http://www2.epa.gov/toxics-release-inventory-tri-program/other-toxic-chemical-resources

http://az204679.vo.msecnd.net/media/documents/wmt-chemical-policy_130234693942816792.pdf

http://www.greenchemistryandcommerce.org/

https://outdoorindustry.org/responsibility/chemicals/cmpilot.html

http://www.epa.gov/pesticides/regulating/labels/design-dfe-pilot.html

http://info.purestrategies.com/path-to-product-sustainability-0

ConclusionEvolution of retail sustainabilityOver the time we have tracked the progress of retail sustainability programs, we have noted a specific development trajectory. Retailers' programs typically begin with a focus on their own operations—with an emphasis on energy and waste reduction in stores and distribution centers—and then turn to addressing the product and supply chain impacts. Finally, the leading companies go one step further by engaging consumers and other stakeholders in the company's journey, and help consumers to understand the full impact of their product purchases.

The industry's development dynamicRetail sustainability programs are following the same dynamic as other critical business functions, namely to hone their focus, align business resources, and expand their breadth of activities.

As more retailers build their sustainability strategies and report on their successes, they will further solidify the business case for sustainability. That, in turn, will increased commitment to these programs and expand programs' resources, building momentum across the industry.

The leading companies are already taking advantage of this development dynamic by leveraging the key ingredients for success: engaging executives, investing in people and systems, measuring and tracking progress, setting goals, and storytelling. And they are getting a wide range of benefits from it.

What is next for RILARILA will continue to engage retail executives on the sustainability journey, further building the business case for such programs, and providing venues for retailers to share with one another. And we look forward to tracking and reporting on these developments in the future.
