BrainTrust Query: Will the Sustainability movement be successful in changing the retail business?

Discussion
Aug 17, 2006
Avatar

By Michael
Richmond, Ph.D.
, President/CEO, Packaging and Technology Integrated Solutions


Sustainability is a concept whose time has arrived. In fact, it arrived several years ago, although initially in the context of environment, health, and safety (EHS) programs. Most of the leading companies ascribing to the philosophy – those recognized by Corporate Knights (a Canadian media firm) on its list of the Global 100 Most Sustainable Corporations – have been on this path for five-to-10 years. Sustainability demands both a long-range perspective and a long-term commitment.


Sustainability is all about delivering superior business solutions – ones that are economically, socially and ecologically positive. This is the Triple Bottom Line and is key to what sustainability is all about:


  • Economic Benefits: Continuing to drive waste and cost out of the value chain, and the desire to avoid further regulatory actions which could constrain innovation.

  • Social Responsibility: Proactively addressing issues of worker safety, wellness, and quality of life. It is more and more essential for companies to have a work force that is increasingly productive, stable, and motivated.

  • Ecological Improvements: Responding to increasing concern with global warming, resource depletion, energy consumption, water usage and other environmental impacts that could become global crises as the earth’s population mushrooms by an expected 40 percent in the next four decades. The most aggressive companies have also seen the opportunity to gain competitive leverage from these efforts.

The primary proponents for sustainability are representative of the entire packaging value chain, from raw material suppliers (Alcoa, Dow, Alcan, Stora Enso, etc.), to converters, to consumer packaged goods firms (Unilever, Nestle, Dannon, Henkel, etc.), to retailers (Wal-Mart, Albertsons, Target, etc.). Wal-Mart, in particular, has put its suppliers, both product manufacturers and packaging for Wal-Mart brands, under significant pressure to embrace its sustainability goals.


A significant number of consumers are beginning to base buying decisions on sustainability. The Natural Marketing Institute (NMI) characterizes these leading edge consumers as the Lifestyles of Health and Sustainability (LOHAS) group. According to NMI’s web site, LOHAS describes a $228.9 billion U.S. marketplace for goods and services focused on health, the environment, social justice, personal development and sustainable living. Approximately 30 percent of the adults in the U.S., or 50 million people, are currently considered LOHAS Consumers.


Discussions Question: How do you see Sustainability
influencing the retail business in the next three years? How widespread will
adoption be and what will it mean for all the parties involved?


Retailers recognize that sustainability-conscious consumers
are too large a segment to ignore. While they are unlikely to focus specifically
on packaging, these consumers may be swayed when packaging is more consistent
with healthier, more “natural” products. Some of the fastest growing retailers
are switching to more sustainable packaging, led by Wal-Mart and Whole Foods
among others.


Sustainability represents an opportunity for retailers
in two important ways. First is the potential cost savings that can result from
driving waste out of the packaging value chain. Just three of the results that
Wal-Mart has published add up to over $56 million in annual savings:



  • Installing “sandwich” balers enabling the recycling
    of stretch wrap film – $26 million

  • Reducing the size of Wal-Mart’s brand of toys – $2.4
    million

  • Installing auxiliary power units to heat/cool truck
    cabs and eliminating idling when drivers are resting – $28 million


Second is the potential for a variety of Triple Bottom
Line
benefits that can result in a more highly motivated work force and
increased shareholder value.

Please practice The RetailWire Golden Rule when submitting your comments.

Join the Discussion!

13 Comments on "BrainTrust Query: Will the Sustainability movement be successful in changing the retail business?"


Sort by:   newest | oldest | most voted
Charlie Moro
Guest
Charlie Moro
14 years 6 months ago

Sustainability will not only be a major attribute of a go-to-market strategy, but even retailers like Wal-Mart, that may have been “less sensitive” in the past to the issue, now see it not only as a “good for you” issue, but also a “good for me” issue as they reduce costs like transportation and waste. The interview with Lee Scott in Fortune a few weeks ago is breathtaking in its potential impact to the industry in general if they drive the issue.

Recently, I worked with a major retailer on a seafood program, and while quality specs and presentation were of course top of mind and not compromised, where the issue of sustainability could be supported and incorporated, that was a first choice as a marketing and branding advantage in their mind.

Ryan Mathews
Guest
14 years 6 months ago

I agree with Charlie. Sustainability is the issue of the near-term future. Like everything else, though, I think sustainability will be driven from the supplier side…in this case, downstream suppliers (especially growers).

Ron Margulis
Guest
14 years 6 months ago
As part of my engagement with CHEP, the leading pallet pooler in the world, I have seen the issue of sustainability increase then decrease in importance for both retailers and their suppliers over the last 12 years. During the late 1990’s, there was strong interest in the environment, and while services like CHEP’s had to make commercial sense to retailers and manufacturers, the reduction of waste and timber used was a definite bonus. For the first five years of the current administration, it was almost a dirty word. Now, due mostly to changes in economics (increased tipping fees, higher fuel costs, etc.) and technology (more efficient solar panels, etc.), sustainability is back in fashion. This time, regardless of the administration, it’s got legs. As mentioned, Wal-Mart is backing this issue with a lot of resources — they held a packaging summit to relate to all of their partners the importance of sustainability, and have issued guidelines on what they expect suppliers to do to reduce waste and increase efficiencies across the supply chain. Other retailers… Read more »
Kai Clarke
Guest
14 years 6 months ago

The concept of market sustainability, from a marketing perspective, is already here. However, despite all of our lip-service, we are still a non-sustainable society. Our carbon footprints, the green products we purchase and the percentage of recycled products is still a small percentage of our overall purchases. Our economic gluttony demands that we produce products that provide immediate gratification to fill our needs.

Lifestyles, fashions and our economic productivity all go against the sustainability concept, and are the key reasons why we support products that don’t embrace this. This will continue until we can deliver a better product, built around a sustainable concept, for less. Until then, we have to accept a small portion of our GDP as representing sustainable products.

Bernice Hurst
Guest
14 years 6 months ago

There’s been a lot of talk about retailers in response to this but I think the general public will have a considerable role in determining which way things go. It’s one of the issues on which I think Europeans are well ahead of Americans and cpg manufacturers had better watch out. When people look for fresh products they are also saying that they don’t want a lot of processing or packaging. Unpackaged food may have a shorter shelf life, hence be less sustainable, but producing food that people will buy – and buy more often – is the kind of thing the industry should really be looking at for the medium and longer term. It may be the bigger stores that are least sustainable.

Todd Bukowski
Guest
Todd Bukowski
14 years 6 months ago

Smart, long-term and forward-thinking companies that are not as concerned about the short term whims of Wall Street will be the ones to engage in sustainable practices first. The sustainability movement can be a cost savings overall, in the long term, as much of it is really about eliminating waste, and therefore does not come at a cost to jobs/economy. Wal-Mart is embracing this approach as it is a great motivator for employees to believe that their employer is truly concerned about the environment, but also because of the potential cost savings ($28 million dollar savings from reducing idling of trucks, just as one example), while also providing a competitive advantage at this point.

It is simply a matter of time before other retailers, industries, and mainstream consumers ultimately catch up with sustainability principles and make them simply the cost of doing business, rather than being a point of differentiation.

Michael Richmond, Ph.D.
Guest
Michael Richmond, Ph.D.
14 years 6 months ago

Very good and insightful comments! We have been working on a Multiclient Study on Sustainable Packaging, which will be available this fall, and we have found that the triple bottom line (social, economic, ecological) rationale really does work: More and more companies are moving in a positive direction for sustainability and sustainable packaging.

Our research currently shows a strong retail push but we are now seeing package converters and CPGs beginning to develop sustainability programs (and sustainability packaging programs) for their organizations. And, as some of the comments pointed out – they are doing them for the economic reasons. It was also nice to see the respondents recognize sustainability is more than a fad and will be with us for the long term. It kind of makes a person feel good inside!

Ian Percy
Guest
14 years 6 months ago
Remember those circular diagrams we used to draw in elementary school? The ones where we’d draw arrows to show how water evaporates and then comes down as rain again? And how plants would die and fertilize new growth? How everything in nature is by definition synergistic and self-sustaining? We need to start drawing those again on boardroom walls. “Nature” comes to us from Old French meaning “essential qualities” and a “creative power in the material world.” Seems a long way from our opportunistic approach where we’re interested in “sustainability” if we can make an easy buck out of it. To “sustain” (from ‘sustenir’) means to “hold up, endure.” We didn’t even use the words ‘sustainable development’ until the mid-sixties and wouldn’t have done it then if it weren’t for the hippies. Sustainability is much much more than a business or bottom-line decision. When we discover the ecological and economic power of ‘natural systems,’ truly understand how ‘cycles’ work and employ them in our businesses, we’ll see sustainable prosperity beyond our wildest dreams. Throwing token offerings… Read more »
René Lacerte
Guest
René Lacerte
14 years 6 months ago

The way I see it is that sustainable development is a way of living… More than a way of doing business, more than a trendy movement that many players will try to catch on the fly and use as a cosmetic approach to serve their own goals…

Is it time to integrate that into our best practice ways of doing business? I hope that there’s no need for an answer…

Each of us can be and should be a promoter of such a way of living in his own environment. This is not a philanthropic dream and believe me I’m a rational guy.

Mark Lilien
Guest
14 years 6 months ago

Sustainability is such a broad concept. Being so broad, it allows everyone to pick and choose their priorities and interpretations. Most retailers certainly favor the economic benefits when those benefits can be proven and captured by the retailers. Few retailers embrace “Social Responsibility,” as outlined by Michael Richmond. The key issue: when sustainability goals clash with economic goals, who wins 99% of the time?

Camille P. Schuster, PhD.
Guest
14 years 6 months ago

Interest in sustainability strengthens and wanes as interest in alternative energy, conservation, and ecology strengthen and wane. There will always be a core of people who are committed to sustainability. Consumers and companies are likely to have varied levels of commitment to sustainability depending upon their self-interest.

Ben Ball
Guest
14 years 6 months ago

Like most “better for us” concepts, there are two distinct levels at which sustainability will resonate. The first will always be with the “concerned consumer” who will pay (some amount) more to “do the right thing.” The larger, and infinitely more leverageable, opportunity is when sustainability can be linked to some more practically compelling attribute. For example, “plastic bags = higher petroleum usage/prices.” The final frontier is when the sustainable alternative actually performs better (or cheaper) than the alternative(s).

Stephan Kouzomis
Guest
Stephan Kouzomis
14 years 6 months ago
Well, it took a while for the consumer to figure in, or be part of this presented “sustainability” concept, or eventual reality. Again, sustainability is nothing new, but only under a different word. We, Baby Boomers, have been socially, environmentally and health/fitness conscious, if not activity, on all three fronts. It has taken many retailers a meaningful amount of time to grasp, and maybe, embrace, one, two, or three of the pieces to the sustainability concept. As for the supply chain point, haven’t retailers already completed the cost savings and squeezed the suppliers to “death”….especially, GROCERY, mass merchandisers, and big box operations? The Baby Boomers, their kids, and their grandchildren (X and Y generations) are still awaiting the environmental and socially acceptable efforts of the previously mentioned retailers to embrace and act upon. Yes, Charlie and Ryan are hinting the supplier will pay for such activities. So what else is new!!!! Interestingly, the superior retailers and service driven companies like Marriott, Starbucks, Whole Foods, Wild Oats, Nordstrom, etc. are already in the sustainability mode; and… Read more »
wpDiscuz

Take Our Instant Poll

Do you believe that it is inevitable that the principles of Sustainability will be broadly adopted by the retailing industry?

View Results

Loading ... Loading ...