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A Guidelines Manual for Retailers towards Sustainable Consumption & Production

prepared by

UNEP/Wuppertal Institute Collaborating Centre on Sustainable Consumption and Production

in collaboration with the United Nations Environment Programme

Retailers Calendar Exploring New Horizons in 12 Steps towards Long-term Market Success

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About this Guideline and Acknowledgements

This Guidelines Manual was prepared by the UNEP/Wuppertal Institute Collaborating Centre on Sustainable Consumption and Production (CSCP) in collaboration with the United Nations Environment Programme (UNEP) within the scope of the Sustainability in the Retailer Sector Project of the CSCP. This document reveals a systematic process to locate value creation opportunities on the shop floor, within supply chains and consumer

relations from the sustainability and product life-cycle perspective. It is also accompanied with a separate study identifying options for retailers to inform consumers by means of modern information technologies.

The CSCP would like to acknowledge the high-street retailers that have taken part in the project survey. Their contribution has enriched the Manual. We do hope that their input to this project will especially help inspire others to enhance the sustainability performance of the retail industry.

Thanks go as well to Wendy Wallace, Tomasz Muchorowski, and Daria Karetnikov for their support in the background research work. Last but not least, the CSCP is grateful to the colleagues at UNEP for their continuous collaboration and feedback.

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Table of Contents

To start with

Month 1: Understanding your risks and opportunities from a sustainability perspective . 4

Month 2: Scoping for performance improvements within and beyond your store .............. 9

Enhance efficiency of your in-store operations

Month 3: Ready – Planning and pre-assessment....................................................................... 17

Month 4: Steady – Detailed assessment, target setting and option identification...................... 25

Month 5: Go – Feasibility analysis, implementation and follow-up ............................................ 30

Capture real supply chain performance

Month 6: Ready – Planning and pre-assessment........................................................................ 36

Month 7: Steady – Detailed assessment and option identification.............................................. 43

Month 8: Go – Feasibility analysis, implementation and follow-up ............................................. 49

Discover new grounds in marketing & consumer relations

Month 9: Ready – Planning and pre-assessment........................................................................ 53

Month 10: Steady – Detailed assessment and option identification ........................................... 61

Month 11: Go – Feasibility analysis, implementation and follow-up ........................................... 71

Disclose performance

Month 12: Communication of your achievements ....................................................................... 77

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Month 1 Understanding your risks and

opportunities from a sustainability perspective

You might have a significant potential to affect change in society like no other industry, as you are located in a key position between your suppliers and customers. On the one hand, you are in direct contact with customers, and exert a significant influence on what products they want to buy, and how they use and dispose them. On the other hand, you reach out to suppliers worldwide. In a way, you are acting as a gatekeeper determining which goods and services to be offered.

This position does not only create a responsibility, it also opens up new business horizons and opportunities. This chapter introduces five key sustainability issues to which you might have to pay attention for long-term business

success. The first three areas are concerned with newly arising opportunities, like the growth in markets for sustainable products. The two last ones show how sustainability can help to react to business ‘challenges’, like environmental risks, pressure from non-governmental organisations or upcoming environmental and social legislation.

Figure 1.1: An overview of market opportunities and risks for long term business success of retail companies.

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Save costs by increasing energy and resource efficiency

Experiences… The most direct effect from addressing sustainability in your operations will be reduced costs through improving energy and resource efficiency in the shop. These savings

can occur in the following areas:

• Energy: Energy for heating and lighting might be one of the largest cost centres

in the shop. If your store has open refrigerators and freezers, then this cost will be

even higher.1

• Waste: Waste is a major cost factor for retailers. For

example, retailers are responsible for about 12% of

all industrial and commercial waste in the UK.

Producing an estimated 12 million tonnes of solid

waste each year costs the retail industry around £300

million2.

• Construction: If you are planning to construct a new shop or are retrofitting the

old one, you should consider using sustainable architectural practices, use of

renewable energy resources and construction materials.

Improving resource efficiency can also increase overall efficiency and minimise operational costs. Conserving capital by recovering and re-using assets, minimising waste and obsolesce enhances your asset utilisation. All in all, your profitability will

increase.

Through lighting and energy retrofits, Rabba, a small chain of stores in Toronto, has decreased energy consumption by over 60,000 kWh and saved the company $75863.

Starbucks Japan set up a special task force to implement the Japanese government requirement mandating a 20 % reduction in food waste, which became active in April 2006. They hope to implement this approach in their shops worldwide4.

1 http://www.envirowise.gov.uk/168990 2 http://www.envirowise.gov.uk/page.aspx?o=168964 3 http://www.trca.on.ca/living_city/retail/Greening_Retail_Program_Description-Mar06.pdf 4 http://www.starbucks.com/aboutus/csrannualreport.asp?cookie%5Ftest=1 In their CSR

6

Expand into new markets and respond to customer trends

Experiences… Rising sales of organic food products, organic cotton, energy efficient devices and similar products show how customers increasingly consider aspects related to sustainability in their shopping decisions. The motivations behind this trend are manifold:

• A growing number of customers are willing to pay a premium for

socially responsible and environmentally friendly products due to

ethical considerations.

• Customers might value buying national brands for after-sales service

benefits or local produce for taste and quality.

• Consumers look increasingly for healthier, safer and less fattening

foods, especially with increased concerns about obesity, pesticides,

GMOs and diseases such as e-coli.

• Customers also increasingly pay attention to the energy and resource

efficiency of products. Rising energy prices, use-phase consumption

and life cycle costs have become sales arguments.

By offering and promoting ‘sustainable products’, you can reply to these consumer trends to access new customer groups, increase your sales and create a new ‘high-end’ segment in your markets.

As the example of Coop Schweiz shows, targeted advertising of socially responsible and environmentally friendly products can stimulate market growth even further. As the world’s largest retailer, Wal-Mart has decided in May 2006 that offering more organic food will help modernize its image and broaden its appeal to urban and other upscale consumers. It has asked its large suppliers to assist in achieving this goal.5

Companies in the WWF Wood Group Switzerland attained sales for FSC-certified products in 2004 of about 40 percent higher than the year before. Increases were observed particularly with garden furniture and in the “do-it-yourself” sector.6

Grocery retailer Whole Foods Inc. has become the largest retailer of its kind and the fourth largest in the US. By selling only organic products, and attempting to do it in a new and dynamic way, it has become trusted and well-valued among consumers. The company’s stock prices increased 62% in 2005 and store sales increased 13% for three years in a row!7

5 http://www.nytimes.com/2006/05/12/business/12organic.html?ex=1147752000&en=af030dc9161b4f9f&ei=5087%0A 6 http://photos.panda.org/about_wwf/what_we_do/forests/news/successes/index.cfm?uNewsID=66741 7 Zimbalist, Kristina. (2006) “Green Giant.” From Green Living. Time Style and Design Summer 2006 Supplement to Time.

7

Improve reputation and community relations

Experiences… The relationship with the community in which you are located is very important as at least some of suppliers, customers and

employees are part of it. Your location also affects public transport routes and local transport patterns, and it has multiplier effects on local economic activity.

As the community impacts your business, you in turn impact their daily lives. Retailers can be a place where people meet and interact.

Your shop can be the perfect location for hosting and supporting social and environmental community initiatives. Such activities would not only contribute to social change in your community, but also improve your reputation leading to increased customer loyalty and employee happiness.

Taking part in the actions of “Agenda 21” Plans is not an unusual activity for most of the Western high street retailers. Local governments urge them to be partners for “Agenda 21” actions such as community education and awareness raising campaigns.

Prepare for more stringent legislation

Experiences… Actively implementing sustainable consumption and production can help to prepare for upcoming, possibly more stringent, legislation on environmental and social issues driven by the current concerns about these issues. As an example, energy labelling is already mandatory on all appliances in the EU. Furthermore, the EU Commission, with the new REACH legislation on

chemicals, is considering substitution of hazardous chemicals, possibly even from clothing!8

By anticipating these trends, you can be proactive and address sustainability issues holistically rather then having to respond to new legalisation in a piecemeal fashion. You can also avoid adaptation costs, by making sustainable investments in the first place, and demonstrate your responsibility beyond legal requirements.

Fujitsu Siemens Computers has chosen to market their SCENIC professional PC as a green product, which has resulted in a large reduction in the use of chemicals. Fujitsu Siemens Computers is aiming at 100% recyclable components in the future’ is better. This effort has resulted in the award of the Nordic Swan Ecolabel, in 2001. Fujitsu Siemens was at that time the only PC Company that has achieved the Nordic Swan label.9

8 Green Peace Website http://www.greenpeace.org/international/news/toxicfreefashion190606 Last Accessed: June 29, 2006. 9 http://www.ecocouncil.dk/download/REACH-M.pdf

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Respond to consumers and NGO complaints

Consumers are becoming increasingly aware of environmental and social issues, and at the same time, sceptical of businesses. 11% of

consumers in the US boycott the products of suspected polluters and buy from those they trust instead.10 In the US many school districts are banning foods with low nutritional value, such as soft drinks and candy. These products are coming under fire from politicians and consumers alike that are trying to halt the obesity crisis.11

The discovery of abuses in the supply chain by increasingly active pressure groups and media could result in damage to a company’s public image. In the UK and US, there is huge pressure on the

supermarkets to act on sustainability issues. Many watchdog groups, such as tescopoly.org and walmartwatch.org work to protect workers rights at home and abroad. Others, such as the UK Consumer Council, issue benchmarking studies to compare performances and push for higher standards.

Experience of some retailers:

B&Q, a major DIY retailer in the United Kingdom was targeted in the early 1990s for not having assurances that its products were not being harvested from endangered forests. This hurt its business, but in the long-run, it was able to create a supply-chain management scheme. Now B&Q assures that all of its wood is sustainably forested with the FSC label, as does the Home Depot, to ensure that they are not targeted.

You may like to follow the example of the textile industry and introduce ethical and environmental codes of conduct in order to reduce supply chain risks. This type of code sets down minimum standards for working conditions and in most cases description of environmental management systems for supplier companies. (See Month 7 for a list of retailers’ initiatives and codes of conducts towards sustainability)

References

Toronto and Region Conservation. (n.d.). Greening Retailer – A Programme of the Living City. Available at: http://www.trca.on.ca/living_city/retail/Greening_Retail_Program_Description-Mar06.pdf

McIntosh, Jay and Julie Kunkel. (2005). Consumer Trends Report. Ernst & Young LLP. Available at: http://www.ey.com/us/consumertrendscenter.

European Environmental Agency. (2004). Household Consumption and the Environment.

Sarasin. (2006). Buying into Sustainability: Environmental and Social challenge in Trading, Distribution, and Retailing.

10 Ottman, Jacquelyn. (1998) Green Marketing: Opportunity for Innovation. Chicago: NTC Business Books. 11 Egan, Timothy. (2002) “In Bid to Improve Nutrition, Schools Expel Soda and Chips.” New York Times. June 20, 2002.

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Month 2 Scoping for performance

improvements within and beyond your store

In the first Chapter you were introduced the key sustainability issues that you might need to pay attention to for long-term business success. The second Chapter focuses on how you can define the boundaries of your future actions to address them.

The core question for this step would be: “Having recognised limited resource availability, where should be the boundaries of actions to create the highest value?”

To set your boundaries for action you might like to look into the following dimensions:

Dimensions for boundary setting

Where are our boundaries for the most value creation?

In-shop focus • Have we improved resource efficiency of in-store operations to the maximum extent possible?

• Are there more possibilities to enhance eco-efficiency and reduce environmental impacts of in-house activities?

• Is there already an internal environmental management system in place?

Supply chain focus • Are we aware of all environmental and social opportunities linked to our supply chain operations?

• Have we optimized our supply chain functions, namely planning, sourcing, producing, storing, transporting, and reverse logistics?

Marketing and consumer relations focus

• Can we reduce life-cycle costs of products? Can we ultimately reduce costs for our customers and us?

• Is there a potential to reduce cost of ownership to customers? • Are we following the latest lifestyle trends? Can we expand our portfolio of products with

improved environmental and social attributes? • Are we already encouraging safe and effective disposal of products to show

responsibility through the product life?

Combined focus on the value chains

• Do we have the capacity to work on multiple focus areas along our value chains? • Can we set up a management team for our value chains?

Product category focus • If we are to look for opportunities in our value chains, which product categories should be our focus?

Geographic area and entity focus

• Which locations and selling points are relevant sources of opportunity for value creation?

• Can we have flagship sites for performance improvements? Table 2.1: Looking at your boundaries of action to create the highest value with limited resources

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Life-Cycle Perspective to Create the Highest Value for Your Business

As mentioned in Month 1, retailers PS: replace ‘sit’ with ‘are located’ in a unique position between the suppliers and consumers. From this unique position, how far are the opportunities for value creation located? Are the

sources for value creation on the shop floor, at the production site of the suppliers or in the hands of the consumer?

For retailers of consumer goods, major opportunities for value creation through environmental, health and safety performance improvements can be located upstream and downstream of the product chains within which they are located. Figure 2.1 illustrates this point. The x-axis denotes the scale of the environmental footprint (upper curve) and business efforts (lower curve), whilst the y-axis describes the key stages from production involving raw material extraction through disposal at the end of use. Even though manufacturing creates the smallest environmental impact, it has been the most direct relevance for companies and policy makers. In this respect, there could be many upstream and downstream environmental improvement opportunities, which can add value

to a retailer’s operations.

Figure 2.1: The mismatch between the opportunities for value creation and management efforts for environmental improvements (Adapted

from WWF-UK, 2003).

For instance, the most significant environmental impact related to food consumption comes from food production (agriculture) and processing. These include the effects of emissions from livestock, agriculture, and industry on water, soil, and air; overuse of fish resources and increased transport of food; but also waste from production processes, in particular organic and packaging waste. (See Box 2.1 below for a concrete example)

This Guideline is divided into

three pieces: enhancing

efficiency of

in-shop operations,

supply chain

performance improvement,

and

discovering new grounds on customer

relations.

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Box 2.1: Environmental Focus Areas

Life-cycle perspective can provide you with a more effective understanding of your opportunities. A cradle-to-grave assessment of your operations can show on the one hand problems with asset utilization, cost reduction,

risk management, and on the other hand prospects for improving your relationship with your customers or your community in which you are operating and enhancing your brand value by influencing operations beyond your shop floor. For more information on life-cycle analysis see Box 2.2 below.

Did you know that… almost 80% of environmental impacts of products sold by the retailers usually occurs beyond the shop floor while only 20% can be attributed to the in-shop activities?

• A life-cycle analysis of a pair of trousers sold at Marks and Spencer stores found that 76% of the energy consumed in connection with the trousers was from the customer’s washing, drying, and ironing them.

• IKEA is a global home furnishings retailer with more than 160 stores in over 33 countries. Customer travel to IKEA stores accounts for 82% of its total Green House Gas emissions. IKEA has found out that it could have a lot of influence over this source of emissions when selecting sites for new stores.

Source: WRI, Hot Climate Cool Commerce Box 2.2: Environmental Impact of Products throughout the Life-Cycle

Chapters

6,7 and 8 deal with finding

focus areas in

your supply chains and

ways of

improving your

performance

Environmental focus areas - recognise the priorities in product chain

In order to improve your performance in terms of resource efficiency and ecological/social concerns it might be necessary to have a look at the entire supply chain. Obviously, there are certain areas where resource use as well as social or environmental impact is particularly significant. You might look upstream at your supply chain to find out - for instance - how resource- or environmentally-intensive the production of goods you offer is. This process of screening of different stages of the supply chain might be performed with different instruments, e.g. life-cycle assessment methodology. The resource use and environmental impact can be explained as a matrix showing how these two perspectives can be integrated into one model (see figure 2.2).

Figure 2.2: Priority areas with high environmental impact and resource use (Source: Wuppertal Institute) For example, a study conducted by the Wuppertal Institute for Climate, Environment and Energy about the coffee chain has shown coffee cultivation (agriculture-part of supply chain) to be the largest contributor to the overall environmental impact of the coffee chain. Thus, this part of the supply chain was marked ‘3’ in the chart, as there are certain areas of intensive resource use and high environmental impact. For instance, producing coffee requires high level of land and energy use (resource-side) and significant effluents to water (environmental-side). Consequently, increased shares of shade grown coffee and less intensive farming techniques, including reduced levels of agrochemicals, may help reduce the two-fold impact. Source: Wuppertal Institute for Climate, Environment and Energy (own studies, 2002)

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Figure 2.3: IKEA has more than 50 product categories

cited on its online stores. (Source: IKEA Singapore)

website)

Figure 2.4: Identification of the geographical focus based on risk classification at

H&M. (Source: H&M Corporate Social Responsibility Report 2005)

Products with Highest Value Creation Potential

Products are at the core of your business. In your retailer store, there might be a wide array of product

categories. For example, IKEA cites more than 50 product categories on its online retailer stores. The question is whether it is reasonable to concentrate on all or to focus on some (See Figure 2.3).

Some product categories might have more strategic value for your business, promise more potential for market expansion, and/or are more likely to contribute to your current environmental and social efforts. It makes perfect business sense to focus only on these

product categories. This would also allow you to utilize your limited resources effectively.

Regions with the Highest Value Creation Potential

In parallel to product chain and product category related scoping, you can also decide on the relevant geographical areas, selling points or entities (such as suppliers) to concentrate your environmental and social improvement efforts.

The level of significance of a geographical area or suppliers depends directly on the scale of environmental and social impacts. The higher the level of impact, the higher the possibility for cost reductions, waste minimization, reduction of downtime, decreasing risks of interruption, enhancing product and process safety, etc., and hence, the higher the strength of

profitability and asset utilization linkage.

High social and environmental impacts can be identified by risk assessments. For example, H&M divides the countries in which its suppliers’ factories are located into risk categories. Based on this classification, factories in high-risk countries are then subject to more comprehensive audits (see Figure 2.4).

Another example is how IKEA is monitoring the performance of its suppliers based on “The IKEA Way on Purchasing Home Furnishing Products” (IWAY). IWAY auditors screen regional differences in compliance with the company code of conduct and this allows IKEA to locate a geographical focus for performance improvements (See Figure 2.5).

Once you select the

relevant

product categories for

value

creation, the next issue is to select the

material, environmental

and social

issues within these product

categories.

Month 6 tackles with

this task!

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Figure 2.5: Identification of geographical priorities based on the IKEA Way on Purchasing Home Furnishing Products (IWAY) fulfilment

rates. (Source: IKEA Social and Environmental responsibility Report 2005).

How to?

Three major selection criteria can be helpful for your boundary setting exercise: (1) Level of significance in relation to potential risk or value creation, (2) Degree of control and/or influence by your retail company, and (3) Degree of improvement potential in relation to potential risk or value creation. These can be applied for each boundary setting dimension i.e. product chain phase, product group, entity or geographical area.

• Relevance for your business – Which areas are likely to crate value for your business from environmental and social perspective?

You can compare whether a certain area can contribute more directly to your financial performance than others. Focusing on environmental and social aspects of particular product groups or brands might bring

more value to your business. For example, in some product chains, environmental and social issues might be more relevant for revenue growth, asset utilization, and/or service quality. Recent feedback from your customers or a talk with your suppliers might have signalled that health and safety improvements in particular product lines can enhance customer satisfaction and guarantee business continuity. These products can be your focus. On the other hand, in particular regions your shops might particularly have environmental conscious customer profile. You might like to scope down only to those shops from the consumer relations perspective.

• Improvement potential – Though this area is potentially interesting, is room for improvement in that particular area eventually high enough?

Another criterion can be how much of room for improvement a certain area has compared to others. For example, environmental improvements such as energy savings in the shop can help to cut costs. Reduction of costs has direct affects on profitability. However, if your retail company has already been commencing some initiatives for decreasing energy use, the room for improvement may not be as significant. Instead you might locate more significant opportunities related to the products that you are selling; hence, investigating opportunities in your product chains might make more sense. On the other hand, if your retailer company has

Months

3, 4 and 5 deal with internal

environmental

management opportunities.

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not yet systematically searched for the opportunities for environmental and social improvements in the shop,

the least resource intensive effort can be to start with your own shop floor. Immediate benefits can be located and realized.

• Ability to effectively control or influence – Are you able to apply improvements effectively in this particular area or region?

For an effective improvement of your environmental, social and economic performance, a good influence on the network of entities in your value chain is needed. You might like to judge between entities, which are wholly or partially owned by your retailer company. It should also be considered which entities’ sustainability performance can be tracked and in what manner. Hence, you might like to include regions or shops, which are under your direct management control.

You might like to map various areas (such as product groups, entities, geographical areas, phases of product chains) on a chart and discuss the results with a strategic team to set your boundaries for conducting environmental and social improvements. The following chart could be helpful for this exercise. You might focus on the areas falling into the upper right hand side of the chart, where potential for all dimensions would be high.

Figure 2.6: Three dimensions of boundary setting.

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Alternatively, the following matrix might also help you to define your boundaries or scope for conducting

environmental and social improvements:

Dimensions for boundary setting Relevance (1=low, 2=medium, 3=low)

Improvement (1=low, 2=medium, 3=low)

Ability to control/influence

(1=low, 2=medium, 3=low)

Sum

Product chain phases

In-shop focus

Supply chain focus

Marketing and consumer relations focus

Product category focus

Product group X

Product group Y

Product group Z

…

Geographic area / entity focus

Store X

Store Y

…

Region X

Region X

… Table 2.2: Defining boundaries for conducting environmental and social improvements

Global Reporting Initiative (GRI)’s Boundary Protocol also intends to provide guidance on how to set the boundary for reporting and how to describe the chosen boundary to report users. This Guidelines Manual eventually leads to communication of your performance improvement; hence it might be already useful to get some inspiration from GRI’s reporting framework.

References

EEA. (2005). “Household consumption and the environment”. European Environment Agency. EEA Report. No 11/2005.

GRI. (2005). GRI Boundary Protocol. www.globalreporting.org/ReportingFramework/G3Online/SettingReportBoundary/

WWF-UK. (2003). “To Whose Profit? (ii): Evolution. Building Sustainable Corporate Strategy”.

WRI. (2006). Hot Climate Cool Commerce. A Service Sector Guide to Greenhouse Gas Management.

Month 12 deals with

communication

of your performance to

various stakeholders.

16

Enhance efficiency of your in-store operations

Ready

Planning and pre-assessment

Steady

Detailed assessment, target setting and option identification

Go

Feasibility analysis, implementation and follow-up

17

Enhance efficiency of your in-store operations Month

3 Planning and pre-assessment

In the coming three chapters the guide will assist you to identify opportunities and implement concrete performance enhancing projects to increase efficiency and reduce environmental impact from the perspective of your in-store operations. This chapter focuses on developing an understanding of trends and challenges and suggests an easy to use methodology to scope priority areas for detailed review and action in retail operation.

Trends & issues

As discussed in Chapter 2, ‘in house’ activities may not represent the majority of overall life-cycle impacts. Improving in-store performance nevertheless offers benefits that are directly perceived by retailers through reduced operating cost, improved asset utilisation and greater profitability. For this reason, addressing in-store issues is a good first step for retailers to contribute to sustainability while reducing cost at the same time.

Addressing in-house environmental issues can be an important intangible value driver because improved in-house performance can be easily communicated to management, staff, consumers and other stakeholders, which will serve to enhance your corporate image. Furthermore, there already exist well-established Cleaner Production Methodologies originating from the manufacturing sector that can be directly applied to retail operations.

An often neglected opportunity area for the retail sector is that of the building and surrounding landscape. Vehicle

parking facilities, for instance, are often sources of significant oil contamination in urban rainwater runoff. Green building design has been gathering momentum for some time in the office building sector due to reduced operating costs and enhanced working environment for staff. Similar opportunities are available in the retail sector in terms of reduced energy and operating costs in addition to making for a more inviting customer shopping experience. For more information on energy efficiency and waste prevention see Box 3.1 below

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Opportunities in energy efficiency and waste prevention

Energy for heating and lighting represents on average the third largest cost to retail stores and much more so in operations with freezing and refrigeration. The UK Carbon Trust indicates that a 20% reduction in energy use typically represents the same benefit to bottom lines as a 5% increase in sales turnover. Unnecessary disposal of solid wastes, costs associated with inefficient water use and wastewater discharges as well as staff motivation issues connected to perceptions about environmental sustainability of the retail operation all influence retail bottom lines.

Box 3.1: Opportunities in energy efficiency and waste prevention


Critical to the success of any business project is management endorsement to proceed. An environmental program in a retail environment is no different and this should be the first priority. Management should clearly communicate and demonstrate their support in addition to providing financial necessary resources for the

program. Once receiving management endorsement, you will need to build a team to undertake the project. Team members should be open minded, possess creativity, drive, and have expertise in operational management of the facility. Importantly, the team should be empowered to effectively conduct the project (e.g. concerning access to information) and implement improvements.

In some instances staff may need to be recruited to provide advice and input for specific phases of the project. Involving non-core team members in the project offers the opportunity to build ‘ownership’ and support for the initiative from front-line workers, which can be a critical success factor for the overall success of the project. Some additional issues to consider at this stage:

• Responsibilities of each team member should be clear and agreed on to avoid confusion.

• A work plan and deadlines should be developed. Dates for periodic meetings for progress reporting and

feedback should be established.

• The form and frequency of communication with staff, management, suppliers and customers, where

appropriate, should be decided.

Facility review

The objective of this phase of the project is to identify key areas for action by understanding baseline conditions in your operation. Based on this understanding you should focus on the areas where the greatest gains can be achieved. The project team should familiarise itself with the facility, areas of water use, waste disposal, and

transportation practices. In particular, you should focus on areas where energy is used such as coolers, freezers, boilers and heating and air conditioning units. The team should prepare a map and process flow for the facility identifying areas of interest for efficiency improvements. For an example of energy conservation see Box 3.2 below.

The table included at the end of this chapter provides an example of how a retail facility might be evaluated by ranking performance of each area as ‘Optimal’, ‘Average’ or ‘Improvement needed’. The tips and questions provided in the table can be used directly or can serve as input to a customised document you develop for your specific needs. Regardless of how you proceed, the end result should be an overview of improvement opportunities and their root causes within the facility.

The 2006 UNEP

publication ‘Greening

Shops and

Saving Costs’ outlines many

benefits and

opportunities for eco-

efficiency in

retail settings

http://www.unep.fr/pc/retail

19

Energy conservation and internal environmental management - Coop Italy

A number of branches of Coop Italy, an Italian grocery chain, decided to become members of the European Commission sponsored GreenLight programme. As a members under the GreenLight programme, the Coop branches committed themselves to implement lighting upgrades and document progress. Between 2001 and 2005 Coop Italy implemented 135 lighting efficiency improvement projects that reduced electricity consumption by 20,405 MWh of electricity over a retail floor space of 444,028 square metres ( 474,000 square ft). In recognition of their outstanding achievements, Coop was awarded the 2006 GreenLight Award for improved lighting efficiency.

Source: www.eu-greenlight.org Box 3.2: An Example of Energy Conservation and internal environmental management

Cause and effect analysis

The objective of this phase is to undertake a cause and effect analysis to understand the root cause of the issues as well as determine what other related undesirable effects might be occurring as a result of the root problems. You should undertake the analysis as soon as possible following the initial review as problems and issues will be fresh in the minds of the review team, which will enable a more informed analysis and will lead to better results.

To understand the areas of your operation that need improvement in detail, a number of tools are available to

assist with determining the root causes of problems and their true effects. These include brainstorming exercises, process flow diagrams identifying process inputs and outputs, layout maps, material and energy balance exercises, and Ishikawa diagrams, also known as a fishbone or cause-effect diagrams originally designed for quality management purposes. Selecting the appropriate tool for your project will depend on your preferences and needs and there is no hard and fast rule concerning which tool is most appropriate. Wherever possible, actual costs for aspects such as water and energy consumption, waste and sewage disposal, recycling and other cost items should be compiled. Having these costs at hand will enable the team to more completely understand the full scope of the problem and will assist with the coming stages of the process described in the next chapters.

References

Envirowise: Energy and Your Store http://www.envirowise.gov.uk/page.aspx?o=168990

Carbon Trust: Retail Sector Overview. Publication ID CTV001 www.carbontrust.co.uk/Publications/publicationdetail.htm?productid=CTV001&metaNoCache=1

BREEAM Retail Design & Pre-Assessment Estimator www.breeam.org/retail.html

Key tools for assessing

retail

operations are described in detail in the

2006 UNEP publication

‘Greening

Shops and Saving Costs’


20

How to?

Energy

While the absolute energy consumption of your facility will depend to a large degree on your sector, energy is usually among the top operating costs for retailers. Since even small improvements in energy efficiency can make a big difference to operating costs and environmental impacts, this section of the evaluation is of particular importance.

Performance Evaluation Internal environmental issue – Energy

Optimal Average Improvement needed

Root causes

Freezers and coolers • Placement near heat sources? • Overcooling? • Properly installed and maintained? • High efficiency? • Energy loss minimisation through doors & covers? • Electrical metering of large freezers? • Ozone friendly refrigerants?

Air conditioning • Overcooling? • Off or reduced cooling after hours? • Optimisation efforts, such as switching off in unused

areas? • Automatic shut down of air conditioning when

doors/windows open? • Ventilation by opening windows instead of full air-

conditioning? • Heat exchanger to reduce costs resulting from ventilation

system?

Heating • Reduced heating after hours? • High efficiency boiler or heater? • Properly insulated building? • Modern thermal windows? • Doors kept open in winter months? • Heat exchanger to reduce costs resulting from ventilation

system? • Solar water heaters, geothermal heat potential?

Lighting

• Use of natural lighting where possible? • High efficiency lighting? • Lights off where not needed? • Timers/motion sensors to shut lights off in infrequently

used areas?

Electronic Equipment

• Cash registers & other equipment switched off after hours?

• Cash registers and other equipment standby power

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Performance Evaluation Internal environmental issue – Energy


Root causes

consumption? • Office/administration ICT equipment shut off when not in

use? • Power consumption of electronic vending machines

(especially with coolers) • High efficiency lighting for marketing displays?

Lifts/Escalators/Elevators • Operational only when needed or always operating? • High efficiency motors?

Renewable energy • Renewable energy available from your electrical

company? • Solar water heaters? • Photovoltaic cells for roof of facility? • Passive heating and Green Building Design?

Table 3.1: Performance Evaluation of Energy use

Water

Water use is an area that is often overlooked. Not only do you pay for water you use, but also for sewage discharges, hence you are paying twice. Consequently, efficient use of water offers retailers opportunities for significant improvements in environmental performance and cost savings. Is your facility wasting water? Do you monitor water use and how much it is costing you? Which areas of your store consume the most water? The following provides a guideline for reviewing water use in your store.

Performance Evaluation Internal environmental issue - Water


Root causes

General • Regular monitoring of water meter to check for unexplained

increases in usage? • Separate metering of major water consuming areas? • Dripping taps? • Leak testing? • ‘Self closing’ push taps? • Overflow prevention in sinks/tanks?

Sanitation facilities • Water efficient toilets/taps? • Motion sensor flush systems? • Leaking sanitation equipment?

Product washing • Efficient water use for washing facilities (e.g. vegetable

washing)? • Low flow nozzles/dispensers? • Automatic shut off for taps? • Reuse of ‘grey’ water (e.g. for irrigation)?

22

Drains • Sources of leaks leading to drains identified? • Location of all drains known (to prevent risk of discharge of

high risk substances to drains)?

Table 3.2: Performance Evaluation of Water use

Waste

The cost of waste is not just that of disposal. The true cost of waste is 5 to 20 times the disposal cost when considering the value of returns and damaged stock, discarded packaging, inefficient use of water and energy, and the time and effort spent handling and managing waste.

Performance Evaluation Internal environmental issue - Waste


Root causes

General • Waste sorting facilities provided & used? • Donation policy for outdated or non-saleable (but functional)

products? • Employee training on effective waste management

practices?

Packaging waste • Packaging waste composition monitored? • Shipping packaging (especially cardboard & shrink wrap)

recycling? • Reusable freight containers & trays? • Agreements with suppliers to reduce packaging waste?

Food & organic waste • Food waste composting or sale as animal feed? • Program to minimise food waste?

Advertising & promotional materials • Outdated/Expired advertising materials recycling? • Non-toxic ink & dye in promotional materials? • PVC free customer appreciation cards? • Reusable shopping bags on offer?

Promotional equipment/materials • Recycling/reuse of unwanted promotional equipment?

Business machines & equipment • Management for defective & outdated electronic business

machines and equipment? • Sound disposal of expired fluorescent light tubes?

Table 3.3: Performance Evaluation of Waste: Advertising and Machine Equipment

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Facility

Green building design is becoming increasingly common in the commercial sector because of significant savings in operating costs as well as supporting enhanced staff productivity due to improved working environments.

Leading retailers are also beginning to consider the advantages of green buildings for their operations. Even if you are not in a position to start a new green building from scratch, there are many opportunities for you to improve the environmental performance and increase efficiency of your building facility.

Performance Evaluation Internal environmental issue - Facility


Root causes

Transportation • Availability of public transport for staff & customers? • Vehicle traffic problems? • Optimised goods delivery? • Goods being damaged/wasted during delivery?

Safety • Fire & emergency exits unobstructed? • Fire extinguishers in place and properly maintained? • Emergency procedures in place and staff trained?

Neighbours perception of facility • Noise levels? • Lighting disturbance? • Vehicle traffic issues/concerns? • Waste storage odours?

Green & sustainable building design • Roofing colour to absorb/reflect heat? • Low emission green flooring & interior architectural coatings? • Passive heating, cooling, daylight use, rainwater use, use of

grey water? • Onsite biological wastewater treatment & reuse? • Locally sourced building construction materials?

Building maintenance • Green contract services (cleaning, catering, maintenance)? • Low water temperature and water conserving cleaning

practices?

Landscaping • Rainwater and/or grey water collection for irrigation? • Native plant and/or low water consumption landscaping? • Environmentally friendly landscaping practices (e.g. Integrated

Pest Management, native plant species, drought resistant plants)

Table 3.4: Internal Performance Evaluation of Facilities

Staff relations and training

Competition for market share in the retail sector is intense and consumers are as a rule extremely price sensitive. For this reason, retailers can face significant pressures to keep salary costs to a minimum. As a consequence,

24

staff incomes are often low and more and more retailers are relying on part time and casual on-demand workers

to remain competitive. Many retail workers are unable to earn a living by working in retail alone. Nonetheless, while companies may face cost barriers to increasing salary levels, there are real opportunities to improve conditions for workers and in return win greater loyalty and dedication from your staff. Furthermore, due to increasing consumer and civil society attention, issues such as labour conditions in retail environments and in your supply chains might pose a priority.

Performance Evaluation Internal environmental issue – Staff relations and training Optimal Average Improvement

needed

Root causes

Working conditions • Staff exposed to temperature or noise extremes? • Poor air quality & dust/vapours? • Staff understanding on how to do their jobs safely? • Policies on sick leave and/or maternity leave?

Training & development • Staff training and updating of training? • Reinforcement of environmentally responsible behaviours

among staff? • Regular performance reviews? • Rewards program for good performance? • Staff development and promotion system?

Engagement • Internal communication system? • Input for decisions affecting daily work (e.g. restructuring,

recruitment)?

Table 3.5: Internal Performance Evaluation of staff relations and training

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4 Detailed assessment, target setting and option identification

In the previous month you identified aspects of your retail operation where opportunities for improvement are greatest. Based on these identified priorities you can focus this month’s activities on examining the priority areas in detail and develop options to address the root causes of problems.

When identifying options to address the problems, you should utilise all possible means to identify possible solutions. In particular, engaging front line staff in the detailed assessments can prove a valuable and useful means of option identification because of their first hand knowledge of the equipment and processes. Following the detailed assessment you should be well prepared to develop options to address your priorities and evaluate those options with respect to their capacity to achieve your objectives.

Detailed assessment

During the pre-assessment phase you identified priority focus areas for more detailed evaluation. It is likely that you identified some obvious areas for improvement and these areas should be the first focus of the detailed assessment. For each identified priority area the table presented at the end of this chapter provides a suggested format for evaluating the different areas of your operation. However, because every operation is unique you may wish to develop customised tables to examine your specific circumstances. Figure illustrates a typical procedure for the assessment phase.

Figure 4.1: Procedure for assessment phase The most direct way to measure performance of your facility is through documents such as energy and utility bills and invoices for waste disposal. If data exists for several years, examining trends over a period of time will enable

you to better identify priorities, for instance by identifying areas where costs or impacts are increasing more

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rapidly than others. You may also wish to consider comparing different aspects of your facility among similar units

or activities at different locations to determine those with the lowest impact within the overall organisation. Such comparative data can be very useful in setting targets for less well performing sites or units within your facility. In addition, relating the costs of various aspects of your operation to retail floor space and/or in relation to your overall operating expenditure will enable you to assess different efficiency enhancing options in relation to your overall business.

Target setting

Once you have determined the performance levels of your areas of interest (e.g. energy, water or waste production), the next phase is to establish clear achievable targets for improving performance. The targets should also serve as indicators that can be used to measure progress toward meeting your goals. When setting targets, you may wish to consider striving for a phased approach to improving performance and establish targets over two or more years. Importantly, targets should be SMART – Specific, preferably quantitative, Measurable, relying on indicators that can be directly measured, Attainable, aiming for realistic achievements, Relevant, indicating root causes of problems, and Timely, by establishing defined time limits. When allocating responsibilities for achieving targets, care should be taken to ensure that responsible persons have sufficient authority to undertake the

required changes and/or make necessary investments.

The enclosed Target Setting table provided at the end of this chapter suggests a format for establishing targets. The operational aspects included in the table are provided as suggestions and you are free to modify and include only those which were identified as priorities in your pre-assessment. For an example in Internal Environmental Management see Box 4.1 below

Internal Environmental Management – Metro Group, Germany

Germany’s Metro Group systematically monitors energy consumption at its stores in Germany. Locations with unusually high energy consumption and corresponding energy costs are examined in detail on the ground. At one location in Ludwigshafen, Germany, energy consumption was reduced drastically by conversion of the site’s air conditioning system, thereby reducing carbon dioxide emissions by nearly 800 tons per year. Energy consumption per square meter of retail floor space in Germany was reduced by nearly 10 percent in the year 2005 alone. At Metro’s Cash and Carry Wholesale store in Hai Phong, Vietnam, energy consumption has been drastically reduced by installing high tech solar water heaters which are capable of serving the shop’s entire demand for hot water. Three solar collectors on the roof of the store provide energy to heat 16,000 litres of water daily in an ecologically efficient and inexpensive manner every day.

Source: Metro Group Box 4.1: An example of Internal Environmental Management

Option generation

The tables 3.1 to 3.10 in the pre-assessment phase of the guide provide a good deal of suggested improvement measures for increasing efficiency and reducing costs and can be a useful starting point for brainstorming options

to meet your targets. There are many other resources and sources of information for tips and options for improving performance of various aspects of retail operations. Be creative in this phase; examine all possible options to meet your targets and include technical, managerial and operational solutions. Most importantly, try to develop options that address root causes of problems.

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When generating options, it may be worthwhile to document preliminary estimates of likely costs and potential

savings from each option to serve as starting points of the detailed evaluation to come in the next phase of the process during the coming month. The Option Generation table at the end of this chapter provides a suggested format for generating options.

How to?

Detailed assessment

The objective of the form below is to provide a structured analysis of environmental impacts and costs to your business for each internal aspect in focus. You might complete this form for each priority aspect of your operation. Relating the costs of various aspects of your operation to retail floor space and/or in relation to your overall operating expenditure will enable you to assess different efficiency enhancing options in relation to your overall business.

Aspect of retail operation

Quantity (e.g. kWh electricity, m3 water, tons waste)

Quantity per unit of retail floor space (square feet or m2)

Cost relative to operating cost (percentage %)

Expected future cost or impact trend (significant increase or decrease)

Notes and observations

Table 4.1: Detailed Assessment

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Target setting

The operational aspects included in this table are provided as suggestions and you are free to modify and include only those aspects, which were identified as priorities in your pre-assessment.

Operational aspect

Your current performance

Root cause of poor performance

Your targets Year 1

Your targets Year 2

Tips for target setting

Electricity Electricity consumption (kWh)

Specific

Preferably quantitative, otherwise clear description

Energy Fuel consumption (litres/gallons)

Measurable

Rely on indicators that can be measured directly where possible

Water (litres/gallons)

Attainable

Aim for realistic achievements rather than unattainable targets

Waste Disposal (tons)

Relevant

Measure or provide an indication of the root causes of problems

Facility issues (e.g. neighbour perception, safety)

Timely

Aim at compliance within defined time limits

Staff relations and training (e.g. staff engagement, safety and environmental training)

When allocating responsibilities for achieving targets, care should be taken to ensure that responsible persons have sufficient authority to undertake the required changes and/or make necessary investments.

Table 4.2: Target Setting

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Option generation

The tables in the pre-assessment phase of your in-store operations provide a good deal of suggested improvement measures for increasing efficiency and reducing costs and can be a useful starting point for a

brainstorming of options to meet your targets. You can use the following table to organize possible options to reach your targets.

Operational aspect in focus

Target performance level

Option Likely cost

Potential savings estimate

Other expected outcomes or benefits

Comments

Table 4.3: Option generation

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5 Feasibility analysis, implementation and follow-up

In the previous month you set targets to achieve your efficiency objectives and identified options with potential to

meet those targets. This third and final month of the internal ‘in-house’ section of the guideline guides you through the process of evaluating identified options to meet your targets and provides advice on implementing and following-up actions over time.

Feasibility analysis

The identified options to achieve your targets should be sorted according to their need for detailed evaluation. As

a rule of thumb, the greater the investment required or the greater the change that will be required in how you operate your business, the more detailed your evaluation should be. To critically assess the proposed measures it will be useful to evaluate each option with respect to environmental, technical and economic criteria.

Try to consider issues with all potential impacts and effects in a holistic manner. For instance, disposing of food waste in a manner where it eventually ends up in landfill not only poses a waste issue but may also contribute to greenhouse gas emissions due to anaerobic decomposition of the organic materials in food. Similarly, more effective heating and ventilation systems will likely not only reduce direct operating costs but will also likely result in a more pleasant working environment for staff as well as an enhanced shopping experience for customers. For an example in Water savings see Box 5.1 below. When your evaluation is completed you should select the options that are technically feasible and offer the greatest environmental and financial benefits to your retail

operation.

Water savings and rainwater recovery – Tesco, United Kingdom

Each of Tesco`s international businesses are required to report quarterly on energy, water and waste within a corporate responsibility program. Corporate responsibility strategies aimed at identifying priority areas for action are developed within Tesco through a number of stakeholder and employee consultation processes. One priority area for Tesco has been water use. Tesco has identified staff toilets as their single largest water consumption area and invested some £500,000 to install urinal controls and automatic shut off taps in addition to investing over £800,000 to install rainwater recovery systems. Overall water consumption over the period 2000/01 – 2005/06 has been reduced by more than 29 percent.

Source: http://www.tescocorporate.com

Box 5.1 : An example of water savings and rainwater recovery

The forms provided at the end of this chapter provide a suggested means to undertake a simple comparative feasibility analysis of your options. For larger investments or operational changes you may wish to engage

Choosing from a number of options...

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external expertise and/or apply more elaborate analytical tools such as detailed technical assessments, cost-

benefit analysis or profitability analysis.

Environmental evaluation

Because retailers are a part of an overall production and consumption system you should consider each proposed option from a life-cycle perspective. This can include reduced greenhouse gas emissions by utilities resulting from energy efficiency and more efficient transport practices, reduced demand on water resources due to more efficient use of water and reduced sewage discharges, reduced landfill or waste incinerator emissions due to reduced waste disposal. For an example of environmental management and evaluation see Box 5.2 below.

Importantly, try to consider if proposed options serve to merely shift environmental burdens from one area to another. For instance, with the aim of reducing food waste, products can be packed into smaller food units.

However, this might lead to intensive packaging efforts hence the problem might be shifted from one aspect to another. A further important consideration for the environmental evaluation are the spin off benefits from improved environmental performance, which can often be translated into increased staff commitment and trust resulting from pride in working for a sustainable organisation.

Technical evaluation

Technical evaluation is a critical component of the analysis and may require the input of outside experts. Being confident that an option is technically feasible should be a high priority as technical solutions that do not work will likely result in making a poor situation even worse. Key issues to be considered in the technical evaluation include availability of space, equipment, staff training needs, maintenance requirements, but most importantly the potential effects for your customers.

Impact on existing business processes, for instance timing of certain activities and procedures, as well as effects on customers and product sales should also be carefully considered and evaluated. A key resource for the technical evaluation might be manufacturers and suppliers of equipment who will often provide details of equipment or assistance with the evaluation process at no or little cost.

Implementation of Environmental Initiatives – Metro Group, Germany

The Metro Group’s cross-divisional service company METRO Group Asset Management coordinates environmental and infrastructure needs for the many Metro Group stores and divisions. Having as its primary task the continuous improvement in environmentally friendly business practices and reduced consumption of energy and resources, METRO Group Asset Management coordinates energy and waste management, facility cleaning and pest control at all European locations.

To ensure leadership in its own facilities Metro compiles internationally comparable key figures for energy consumption, water consumption and waste disposal. Using these figures as a basis, Metro has been able to document internationally benchmarked improvement in its operations globally.

Source: Metro Group AG Sustainability Report, 2006

Box 5.2: An example of Environmental Initiatives

Economic evaluation

Economic evaluation is critical to guarantee business success as well as ensure that you are optimising the environmental benefits achieved with your investments. This evaluation step compares anticipated savings

32

against costs of implementing the measure or change. It will be important to have a good understanding of the

baseline conditions for existing equipment and infrastructure and be sure not to forget to consider potential future increases in prices for key inputs. For instance, in regions experiencing rapid growth, such as rapidly developing suburbs of large urban areas, prices for water and waste disposal are likely to increase substantially in the future.

In a retail setting, it will also be important to consider issues such as potential sales impacts due to an enhanced shopping experience for customers that may result from measures such as improved image and more comfortable retail premises. Also, some energy efficiency options, closed-door freezers for instance, may result in reduced sales due to decreased customer access. On the other hand, reduced operating costs may enable you to achieve greater sales volumes because you are able to offer lower prices. These, and many other issues, need to be carefully assessed when undertaking your analysis.

For large or complex investments, analytical tools such as Net Present Value calculations, Internal Rate of Return or Total Cost Accounting exercises may be necessary. Applying these tools may require you to engage external expertise, however, a more formal cost analysis may be necessary when negotiating financing with banks or other lenders. A simple but useful economic evaluation method is to calculate project payback periods based on the required investment in equipment and implementation costs such as staff training and other costs to implement the project divided by the projected annual savings that the project will realise. While this approach does not consider the time value of money, it provides a straightforward and useful measure of the relative financial merits of different options.

Figure 5.1: Projected payback period

Implementation and follow-up

To develop an implementation plan you may wish to break down required tasks into clear steps or phases and clearly allocate responsibility for implementation to different team members or departments. A role for the team leader could be to ensure that each team member is delivering their respective component of the implementation plan and ensure that all tasks are implemented in a coordinated and timely fashion. Starting with the simplest options to achieve ‘early wins’ can build confidence of the team for later challenges and enable the team to

demonstrate its capabilities to management and staff.

Check that the plan is being implemented

Particularly for management and procedural changes it is important to ensure that employees are properly trained and that they understand the reasons for the changes to ensure the desired improvements are achieved. In some cases it may be important for management to take steps to ensure that new procedures are being followed and that equipment and infrastructure is being properly used over time. An investment is of little benefit if employees do not or cannot properly use equipment and efforts at improving internal procedures are of little value if they are not correctly followed. To maximise the chances of staff cooperation and support is important to provide as much

Ensure the plan

is implemented according to

plan...

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information as possible, in the right way and to the right people regarding the changes and the reasons for the

new approaches. The support and involvement of front line staff is critical and the success of the project is very unlikely without it. This is particularly the case for procedural or management solutions but also for technical or equipment solutions.

Monitor results over time and strive for continuous improvement

Monitoring results of your efforts is an important component of the overall process. You may even be surprised to learn that you are realising greater that anticipated benefits for your organisation. Not only will you be able to determine whether your efforts and investments have proven effective but you will be able to clearly demonstrate how environmentally responsible business methods contribute to a more profitable enterprise. Where results have been less than anticipated, you should make note of reasons for poor performance and consider means to improve performance to the desired level. As with any continuous improvement management system, results

should form a basis for target setting in the coming year when the process could be repeated. For an example of Internal Environmental Management see Box 5.3 below.

Internal Environmental Management – Kesko Finland

Kesko Finland, a diversified retail and service firm, has in recent years undertaken systematic and target-oriented programmes to improve environmental performance. The ‘K-environmental store’ operating model is incorporated into Kesko Food’s K-citymarkets, K-supermarkets, and K-markets. Independent audits are carried out when a store introduces the K-environmental store concept and follow-up audits are carried out periodically in randomly selected shops. All staff employed in the K-environmental stores receive training on environmental issues and follow-up training is arranged annually on a variety of themes. Training topics include product selection and labelling, prevention of in-store waste and promotion of recycling, in-store energy management and cleaning practices and consumption-related environmental information for customers. In December 2005, there were 343 K-environmental stores in the Kesko Group.

What has Kesko achieved?

Kesko’s energy efficiency program has realised significant savings largely through day-to-day procedures and operations. Air conditioning and interior lighting have been programmed to coordinate with opening hours, spot lighting has been reduced and the brightness of space lighting has been reduced after hours. Lighting is on in storage and staff areas only when the areas are actually in use. Observing maximum fill levels in frozen food cabinets and cleaning and defrosting this equipment have been underlined as priorities. Other energy-saving practices include eliminating unnecessary cold drink displays, more appropriate night lighting of exterior areas, reducing unnecessarily high water temperatures in hot water systems, turning off computer displays at night, and using automatic lighting in toilets. Altogether, Kesco has achieved an average annual electrical consumption of 270 kWh per square metre and has established a future reduction target to reach 250 kWh per square metre. On average, Kesco’s energy savings investments achieve a payback period of 6 months or less.

Source: Kesco Corporation

Box 5.3: An example of Internal Environmental Management

Evaluate your performance...

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How to?

The following table might be helpful in finding technically feasible option(s) that offer the greatest environmental and financial benefits.

Operational aspect in focus

Target performance level (e.g. kWh electricity, m3 water, tons waste reduced)

Environmental Evaluation – A

Technical Viability – B

Financial Evaluation – C Comment (availability of equipment/materials, potential side benefits or risks)

Option Effects (Positive, negative, more info needed)

Yes, no, potentially/more info needed

Amortised annual cost

Projected annual saving

Projected payback (months/years)

Table 5.1: Feasibility Analysis

35

Capture real supply chain performance

Ready


Steady

Detailed assessment and option identification

Go


36

Capture real supply chain performance Month


One of your daily strives is to get your goods and services to the right place, at the right time, and in the right

condition. Your supply chain functions involve several or all of the following activities: planning, sourcing, producing, storing, transporting, and reverse logistics. The following three chapters will focus on identification and management of environmental and social opportunities and risks linked to your supply chain functions. For this, we use the term sustainable supply chain management (sustainable SCM).

By this we refer to a variety of approaches for the management of natural and human resources from the supplier to your retailer’s shelves. Sustainable SCM emphasizes communication, collaboration, and coordination between your retailer company’s supply chain functions and those of your suppliers, customers, and other service providers. A high performing supply chain contributes to the bottom line through increased revenue, reduced costs, improved asset utilization and enhanced customer service. You may also build critical intangible assets such as product and service innovation, risk and opportunity management, alliances and networks, brand equity

and reputation.

Table 6.1 gives some general hints on where to start in your retailer’s case. Which supply chain functions are the most relevant for your retailer? By working on which issues, can you create the most value for your retailer?

Your supply chain functions Are there any environmental and social actions that can potentially add value to my supply chain performance?

Plan: • Forecast supply/demand

• Design logistics network

• Can we increase the supply/demand forecast accuracy? • Can we consider full life-cycle management of our products?

• Can we optimize supply chain network design?

Source:

• Source and procure • Manage suppliers

• Do we source from the regions/networks/areas/ wherein sustainability considerations are taken into account?

• Do we have a code of conduct presenting our social and environmental standards and principles?

• How can we persuade and better monitor the compliance with our code of conduct on the side of the suppliers and/or contractors?

Produce: • Design and engineer

• Manufacture or convert • Package

• Can we design more environmentally-friendly products in our company? • Can we reduce the ecological footprint of our production methods?

• Can we introduce packaging that is easier reusable and recyclable?

Store:

• Manage warehouse • Receive, pick, pack

• Manage inventory

• Do we incorporate sustainability factors in warehouse development?

• Do we have storage systems in place assuring the proper storage life? • Do we assess the energy consumption in our stores?

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Your supply chain functions Are there any environmental and social actions that can potentially add value to my supply chain performance?

Transport:

• Inbound/outbound transportation

• Manage delivery fleet

• Can we reduce product miles?

• Can we optimize transportation routes and loads? • Can we reduce environmental load of transport routes?

• What is our environmental impact in terms of traffic congestion, noise and accidents? • Can we reduce waste from packaging or shipping containers?

Reverse Logistics (generic questions): • Manage product returns • Reuse

• Recondition • Recycle • Dispose

• Do we have high-value, low-disposition strategies?

• Do we have systems in place enabling our clients the disposal of the used products/packaging?

• Do we have refurbishment practices in place enabling resale of the returned/unwanted products or recondition of the used products?

Table 6.1: Scoping for sustainable supply chain management.

The following business trends suggest a growing need for your retailer to consider the environmental and social impacts of your supply chain activities.

Reckoning upstream risks and opportunities

A major trend linking to upstream risks of retail business is the attempt to use cost reduction benefits and price cuts in order to win market share especially in mature markets. In line with this, outsourcing supply chains to sensitive countries or operating in emerging markets can help to keep costs down and stay competitive. Global sourcing also allows ordering of products from manufacturers overseas without owning or being involved in their operations.

However, this strategy is not without risks. Mismanagements in the supply chain have become the target of intense public pressure as consumer concerns and media coverage reinforce one another. It is not possible to

use the argument that it is the supplier, not the retailer itself that is responsible from social and environmental abuses. The public essentially asks for accountability and transparency in the supply chains. This pressure might even result with seeking regulatory frameworks for disclosing on abroad operations such as the “International Right to Know”-Campaign12.

While pressure groups are more active and better researched in the West and the North, their way of operation is disseminating fast to the East and the South. Especially NGOs, which are able to take advantage of their geographical position, language and access to information, are able to monitor the behaviour of corporations. For example, a Hong Kong-based coalition of labour organizations, namely Labour Rights in China (LARIC), continually exposes violations of worker and human rights as well as criticizing the corporations for not

implementing even their own Codes of Conduct. Moreover, campaigns of western NGOs might be run globally, hence these might affect developing and emerging market operations of retailers. (See Box 6.1 for an example)

12 www.ikrt.org

Low cost strategies

might bring high risk with

it.

38

Labour Behind the Label – Campaigning to release the pressure low-cost retailers applying on their suppliers

Labour Behind the Label (LBL) is a campaign that supports garment workers’ efforts worldwide to improve working conditions. They educate consumers, lobby companies and government, raise awareness, and encourage international solidarity with workers. Its members include trade unions and their local branches. One of their latest publications, namely ‘Who pays for Cheap Clothes?’ questions the new fad ‘Fast fashion’, i.e. giving shoppers the latest styles just six weeks after they first appeared on the cat walk at extreme low prices, and consequently, the pressure created on suppliers in the developing world.

Source: http://www.cleanclothes.nl/ftp/06-07-who_pays_for_cheap_clothes.pdf

Box 6.1: An example of NGO pressure on low-cost retailer strategies.

Other parties performing analysis of the retailer sector such as investment bankers and insurers do also indicate concentration of risks in the supplier operations. As they more and more understand the vulnerability of modern

supply chain operations, new tools of risk assessment are being used. For example, Bank Sarasin mentions that retailer sector’s main impact areas on society and the environment can be found in the pre-production (Sarasin, 2006). (See Box 6.2 for more information)

Retailer sector’s main impacts on the society and environment occur in upstream supply chains

Sarasin Bank examines sectors based on an aggregated assessment of the extent to which a particular industry creates environmental and social risks. Within this industry rating, a total of four risk categories are examined: consumption of resources (e.g. fossil fuels, water), emissions (e.g. air pollutants, creation of waste), potential internal (influence on employment and work conditions) as well as external sources of social conflict (impact on society as a whole). The figure shows a rating for trading, distribution, and retailing industries.

In this industry, main social and environmental impacts occur in the upstream supply chain when sourcing from countries with poor working conditions (e.g. health and safety), vulnerable institutional framework (e.g. corruption) and low environmental standards (e.g. lack of control). Additionally, the industries’ internal conflict potential stems from risks presented by working conditions in shops and logistical facilities (e.g. low wages). Finally, the industry is particularly exposed to a number of external conflicts, which result from its business operations (e.g. food safety, local communities). This risk is proportional to the size and public profile of the retail company. The risks in the pre-production obviously depend on the product range and type of manufacturing sector they relate.

Box 6.2: Bank Sarasin’s sector-wide rating for the retailer industry.

Hence, keeping good track of environmental and social risks in relation to the operations of your suppliers is crucial for maintaining brand equity and reputation of your retail business. There are various multi-stakeholder initiatives, which might aid in locating sensitive regions or aspects along your supply chains. For example, Global Reporting Initiative (GRI) has published sector supplements that pinpoint major environmental and social aspects

39

in several manufacturing and service sectors 13 . Another source is the ‘A Geography of Corporate Risk’

publications, which show where human rights abuses and violations exist. (See Box 6.3 for more information)

‘Business and Human rights: A Geography of Corporate Risk’ published by International Business Leaders Forum (IBLF) and Amnesty International (AI)

In order to understand aspects and geographical distribution of human rights risks, you may refer to a tool developed by Amnesty International and International Business Leaders Forum (IBLF). Both NGOs have collaborated to produce a series of seven detailed world maps, which depict where human rights abuses and violations exist and where leading North American and European multinational companies are at risk of being associated with them. As already indicated in Chapter 2, retailers such as H&M use this generic tool to assess the countries with high social and environmental impacts. This helps H&M to detect all compliance issues as early as possible in order to rationalise and manage their monitoring and remediation efforts.

Source: http://www.iblf.org/resources/general.jsp?id=69 “Business and Human rights: A geography of Corporate Risk” published by International Business Leaders Forum (IBLF) and Amnesty International (AI)

Box 6.3: Mapping risks along supply chains.

As discussed in Chapter 2 of this Guidelines Manual, for almost all retailers of consumer goods, major opportunities regarding environmental and social issues occur beyond the gates of the retailer shop. Almost 80% of environmental impacts of products sold by retailers usually occur beyond the shop floor while only 20% can be attributed to the in-shop activities. Hence, sustainable supply chain activities can help to achieve reductions in the

13 For more information: http://www.globalreporting.org/InDevelopment/SectorSupplements/ Please note that there is currently no ‘retailer’ sector supplement working group established by the GRI.

40

amount of raw materials used. Efforts to increase eco-efficiency or cleaner production efforts can lead to

reduction of operational costs and better asset utilization.

Transport and Logistics Efficiency

Transport might be one of the major activities contributing to the carbon footprint of products that you sell in your retail outlet. Some modes and routes of transportation could be adding to the energy intensity of the products. For example, water is the most energy-efficient mode to transport goods, followed by rail, truck and airplane. (See

Box 6.4 for food miles discussion on foodstuffs)

Hence, the transport link in the supply chain involves fleet vehicle management and inbound and outbound transportation of goods. Whether operated in-house or by third parties, the way that a delivery fleet is managed contributes significantly to the cost and environmental impacts of transporting goods. Effective fleet management can reduce fuel use and vehicle emissions, reduce maintenance costs and enhance customer service.

Food miles: to make the load less travelled

Food miles are the distance food travels from where it was grown to where it is purchased or consumed. The concept of food miles implies that fuel use and CO2 emissions will be lower for food that is transported shorter rather than longer distances. It is an attractive approach to promote local food systems because it’s easy to grasp and there is enough information to estimate the food miles. But would there actually be transportation fuel savings and a reduction in CO2 emissions if more food were produced and distributed locally/regionally? The surveys point out significant savings resulting from the usage of local food systems.

Example: Food miles of apples for Des Moins supermarket (Iowa, USA) Apples grown in Iowa and transported by truck (60 miles)- minor food miles

Apples grown in Washington (state) and transported by truck (1,722 miles)- significant food miles Consequently, the introduction of eco-label information taking into account CO2 emissions and fuel use would provide the consumer with a relative indicator about the transport-related environmental impact of their purchase. Still, mode of transportation must be taken into account before assuming that fuel use and CO2 emissions will be lower for food that is transported for shorter rather than longer distances. Thus water is the most energy-efficient mode to transport food or other goods, followed by rail, truck and airplane. It is also vital that the Life Cycle Assessment (LCA) should be used for holistic assessment of fuel use and CO2 emissions generated for food products from farm production through consumer purchase and use. Locally produced food might not necessarily imply lower CO2 emissions…

Example: LCA- fuel use and CO2 emissions of tomatoes consumed in Sweden Product: tomatoes grown in Denmark, the Netherlands, Sweden and other countries

Consumption point: Sweden Method: LCA – carbon dioxide equivalents per kg. of tomato compared over 20-year period

Result: Spanish tomatoes consumed in Sweden proved to have lower CO2 equivalents than those produced in Denmark, the Netherlands, and Sweden, despite the transportation distance from Spain.

Reason: Spanish tomatoes were raised in open ground while the Swedish, Dutch, and Danish tomatoes were raised in heated greenhouses, which expended more fossil fuel energy in crop production.

Lessons learned: need for a holistic view while assessing the food miles Source: Piroog, Rich; Schuh, Pat: ‘The load less travelled: Examining the potential of using food miles and CO2 emissions in Eco-labels. Prepared for the Conference on Eco-labels and the Greening of the Food Market, November 7-9, 2002

Box 6.4: Food miles discussion with regards to eco-efficiency improvements in product transport.

Chapters 3,4

and 5 on ‘Enhance

Efficiency of

In-Store Operations’

also deal

briefly with transport

issues.

However, it is limited to optimized

employee commuting and goods

delivery. In relation to

sustainable

supply chain management,

we look at

trends and opportunities

beyond optimization.

41

How to?

In order to identify major risks and opportunities regarding environmental and social issues along your supply chains, you might perform a check over your major supply chain functions. Looking from the life-cycle

perspective, on the one hand, you might scan your stakeholders’ environmental and social concerns, which constitute a risk to your reputation. On the other hand, you can try to list down opportunities for more efficient use of raw materials or better asset utilization. The following chart (Table 6.2) might help you to draw your supply chain opportunities and risks map.

Risk or Opportunity related to the Life-Cycle Stage:

SCOPE

Risks & Opportunities

Product Categories / Major Product Chains

Primary Production

Manufacturing/ Processing

Transport

Env.’tal issues & Social Issues

RelatedSupply Chain Func-tion

Relevant Suppliers

Stakeholder concerns

NGO or third-party concerns (such as campaigns, protests, declarations)

Governmental pressure (such as forthcoming legislation, political speeches)

Customer concerns (such as recent complaints)

Potential for cost structure improvement

Potential for increase in asset utilization

Potential for improvement of service level

Potential for enhancement of brand equity and reputation

Table 6.2: Identifying risks and opportunities regarding environmental and social issues

42

References

Holliday, C. O., Schmidheiny, S., Watts, P. (2002). Walking the Talk – The Business Case for Sustainable Development. Greenleaf Publishing.

Kuhndt, et al. (2004). Responsible Corporate Governance - An Overview of Trends, Initiatives and State-of-the-art Elements. Wuppertal Papers. No. 139 . ISSN 0949-5266. Available at http://www.wupperinst.org/Publikationen/WP/WP139.pdf

Labour Behind the Label. (2006). Who Pays for Cheap Clothes? 5 questions the low-cost retailers must answer. Available at http://www.cleanclothes.nl/ftp/06-07-who_pays_for_cheap_clothes.pdf

Penny, M. N. (2006). Greater Vancouver Regional District – Sustainable Supply Chain Logistics Guide.

Sarasin. (2006). Buying into Sustainability: Environmental and Social challenge in Trading, Distribution and Retailing.

43


7 Detailed assessment and

option identification

In the previous chapter, we touched upon the business trends pointing at the growing need for your retailers to consider the environmental and social impacts of your supply chain activities. You identified the most pressing issues for sustainable SCM. In this Chapter, we will look into available tools and approaches to manage these issues.

Utilize Tools for Product Life-Cycle Management

Life-cycle management tools help to identify what options for improvement are available in the supply chain. For example, life-cycle costing allocates total costs – including those traditionally grouped as “overhead” such as waste disposal, training, environmental permitting, and waste and water treatment – to the products and processes responsible for generating the costs. This allows decisions about product design, purchasing and manufacturing to be based on a truer picture of costs over a product’s life-cycle. Life-cycle design is another life cycle management tool, which can help to reduce the life-cycle costs by changing the design of products or their

packaging.

Source Sustainably for Resource Efficiency

A variety of management options are available to work on reducing risks and utilizing opportunities concerning your sourcing and/or production operations. These approaches might be differentiated according to the extend you engage with your suppliers. If your retailer company does not have resources to invest in full engagement or

does not like to involve directly with supplier operations, development of a sustainable purchasing criteria might be a good option to start with.

Sustainable purchasing practices refer to selecting products and services that have lesser or reduced effect on human health and the environment when compared with competing product or service that serve the same purpose. The decision on the scope and ambition level of the sustainability criteria is important. Based on your risks and opportunities assessment, you can identify the environmental and social issues you would like to include in your criteria list.

When developing the sustainability criteria, you might like to differentiate between indirect and direct goods. In order to keep your store or warehouse running, most probably you buy the indirect goods (also called C-goods)

that do take part in the production process but do not flow into the final product and serve the Maintenance, Repair and Operations (also called MRO – goods). These products stand for your store equipment (e.g.

To read

more on “setting up purchasing

criteria”, see UNEP’s

Greening

Shops and Saving Costs Guide, pg. 36.


44

computer, pencil, telephone). Many retail companies have systems in place enabling sustainable sourcing of

these indirect goods. (See Box 7.1)

Sustainable purchasing of indirect goods: H&M

H&M established minimum standards when purchasing store equipment. Beyond the legal requirements specific H&M rules on sustainable purchasing were introduced. These refer to certain materials (e.g. PVC), metals (e.g. lead) and chemicals (e.g. PBB) that should be avoided in manufacturing of store equipment or in the finished products. In certain fields of application the use of the mentioned materials, metals and chemicals was banned. Furthermore, a list with more environmentally-friendly materials, metals and chemicals was established as to provide an overview on first-best purchasing decisions. Similarly, with regard to IT products, H&M require IT Eco Declaration from their suppliers. The Declaration includes information on the environmental practices of the manufacturer as well as environmental features of their products. H&M has developed an evaluation model for assessing the information from the declarations and taking into account legal standards as well as specific H&M purchasing rules. H&M: CSR 2005- Our environmental responsibility: http://www.hm.com/filearea/corporate/fileobjects/pdf/common/COMMON_CSRREPORT_PART2_ENVIRONMENT_PDF_1157098080307.pdf

Box 7.1: An example of sustainable purchasing of indirect goods

Praiseworthy as procuring environmentally friendly furniture or fair-trade coffee might be, these initiatives might divert the attention from more significant areas, and oversee that fact that the retailers’ own sourcing (and/or production) processes might have serious environmental or social ramifications. Thus, there is a very strong case for sustainable purchasing of the so called direct goods (also called A-goods) that constitute the core business of the retailer (and/or flow into the final product- when a retailer is also engaged in the actual production

of the goods, e.g. clothes- H&M, furniture- IKEA, etc.). These goods include the retailer’s product assortment but sometimes also raw materials and components. Many retailers have already established sustainable sourcing of such goods. Hence, these retailers aim at minimising the risks that may arise from, for instance depletion of the natural resources but on the other side also endeavour to secure the quality of the product flow.

Sustainable purchasing of direct goods: long-term business strategy

• Marks and Spencer (M&S) purchases fish exclusively from sustainable fisheries- as to prevent the depletion of certain fish stocks in Europe

• IKEA does not purchase timber, veneer, plywood or layer-glued wood from intact natural forests or from forests with a clearly defined high conservation value.

• METRO imposes strict social rules on their suppliers in Asia and Eastern Europe in the sectors of textiles, sports and toys

• B&Q does not buy or sell peat extracted from peat land sites of recognised ecological, archaeological or other conservation value

Box 7.2: Examples of sustainable purchasing of direct goods

45

Sustainable purchasing at small-scale retailer: MEC’s ‘green’ Winnipeg store

Canadian Mountain Equipment CO-OP (MEC) chose a site for its Winnipeg store in the area of several old, condemned buildings. Although the city officials offered to pull these buildings down, MEC’s designers decided to keep one of them, which was structurally sound enough to re-adapt and re-use the materials from other two. As a result the existing buildings were redeveloped, which reduced the environmental impact of the new construction (the construction material used contained 96% reused and recycled materials). Beyond significant resource savings the redevelopment provided value added to the society by revitalizing an abandoned site in the downtown core. Strikingly, the customer response has also

been extremely positive. MEC’s approach towards green building together with other initiatives demonstrating its values enhanced MEC’s image as a responsible corporate citizen. Finally, the extensive media coverage afforded extra publicity for MEC, what may serve as a good example for other companies that do little advertising. Greater Vancouver Regional District (GVRD): Sustainable Purchasing Guide, 2006

(http://www.fivewinds.com/uploadedfiles_shared/SustainablePurchasingGuide.pdf)

Box 7.3: An example of sustainable purchasing at small-scale retailer

Development of code of conducts can also be done in collaboration with third parties. In this way, the credibility of

the initiative can be enhanced. A sample list of initiatives is given at the end of this Chapter under the heading ‘How to?’. Follow-up with the codes of conduct can be done in a whole variety of ways: monitoring by the retailer itself, monitoring by third parties, and training of suppliers based on the monitoring results.

Enhance Eco-efficiency of Transport Activities

Regarding the transport function, you might increase the efficiency by managing the life-cycle performance of delivery fleet. Specifying fuel-efficient fleet technologies, performing regular preventative fleet maintenance,

providing driver training and reducing unnecessary idling of delivery vehicles are among the best practice applications.

Carrefour: Alternative transport methods

Carrefour is experimenting alternative transport methods to develop sustainable logistics. In France, the company is using river transport (textile products along the Seine between Le Havre and Genevilliers, and along the Rhone between Fos and Lyons) and combined rail-road transport (textile products from the Vert-Saint-Denis warehouse to the Paca stores and Languedoc-Roussillon, and fruit and vegetables from the Perpignan platform to the Ile-de-France and Northwest platforms). Carrefour is also testing clean-functioning natural gas vehicles (NGVs) for urban deliveries in the Paris area.

• In Belgium, the company has been using river transport between Anvers and Villvoorde (Brussels) since 2004, shipping 3,000 containers per year and reducing CO2 emissions by 54 tonnes.

• In Spain, Carrefour has been using sea transport and combined rail-road transport for certain imports from Europe since 2003.

Source: GroupeCarrefour, Sustainability Report 2005

Box 7.4: An example of alternative transport methods

46

Marks & Spencer: launches "Plan A"- £200m 'eco-plan'

In January 2007, Marks & Spencer launched their "Plan A", a business-wide £200m "eco-plan" which will have an impact on every part of M&S' operations over the next five years. Within the Climate Change area, M&S will make their local operations carbon neutral by minimising energy use, maximising the use of renewables and using offsetting as a last resort.

Food miles reduction at M&S In order to achieve the above mentioned goals the M&S intends to (among others):

• Switching to local sourcing: buy as much food from the UK/Ireland as possible, double regional food sourcing within 12 months and grow the existing local supply networks, minimise the amount of the air freighted food as well as label the food imported by air as 'flown'

• Research and development: initiate 5 new R&D projects with their UK growers to develop production techniques and varieties to reduce the amount of imported food

• Carbon offsetting as a last resort- where there is no short to medium term prospect of green technology being developed. When using offsetting, M&S will allocate the cost of doing so to individual business units, as a commercial incentive to minimise CO2 emissions

• Cleaner fuel: use 50% bio-diesel in all M&S lorries Source: Marks & Spencer launches "Plan A"- £200m 'eco-plan’, 17 January 2007 (Press release) Box 7.5: An example of an “eco plan” in order to minimising energy use

How to?

Retailer’s initiatives or codes of conducts towards sustainability stem from diverse consultation processes and are often driven by actors from one sector only or present initiatives binding retailers from various industries. Others emerge from the multi-stakeholder discussions, frequently driven by the NGOs.

Below is a list of examples of various codes of conducts and retailers initiatives with a focus on environmental and/or social aspects within supply chains of retailers. This list is by no means exhaustive.

Business-driven cooperation

Ethical Trading Initiative (ETI)

Country United Kingdom (UK)

Established 1998

Description Code of conduct for suppliers including monitoring, improvement plans and progress reports. The minimum recommended standard is the ETI Base Code. A range of practical training courses is offered. Persistent failures to meet the relevant standards in the supply chain may lead to the member being asked to leave the ETI. Additionally, a database for supplier audits (Sedex) was established.

Info http://www.ethicaltrade.org/

Initiative Clause Sociale (ICS)

Country France

Established 1998 by the French association of retailers (Federation du commerce et de la distribution)

47

Description All members agree to abide by the ICS Code of Conduct, which is based on the US SA8000 standard. Implementation is conducted by independent accredited inspectors as per phased plan. There is an obligation to refrain from competition with measures for checking social conditions at suppliers.

Info http://www.ics-asso.org/doc4/page1.htm

Business Social Compliance Initiative (BSCI)

Country Belgium/EU

Established 2003 by the European Foreign Trade Association, based on earlier initiatives of the German foreign trade association

Description All members commit to implement the BSCI code of conduct for suppliers, which is carried out deleted: conducted in a phased plan. Independent inspectors perform regular checks. A shared database with list of supplier audits was established. Collective training and research projects are organised.

Info http://www.bsci-eu.org/content.php

Electronics Industry Code of Conduct (EICC)

Country USA

Established Prepared between June and October 2004 by HP, IBM, Dell, Celestica, Flextronics, Jabil, Sanmina SCI & Solectron

Description The Electronics Industry Code of Conduct is an industry-wide code covering both social and environmental issues. The majority of the sector’s leading companies apply the code. It stipulates that its provisions shall bind retailers and their direct suppliers. Still it acknowledges that, in order to be successful, it would need to be applied to the whole supply chain.

Info http://www.eicc.info/

Table 7.1: Business-driven cooperation

NGO-driven cooperation

Social Accountability International (SAI)

Country USA

Established Drafting of SA8000 standard 1997. Non-profit-making institution.

Description SA8000 is based on relevant UN and ILO conventions and has a reputation of a strict benchmark. Standards refer to respecting local employment and health & safety laws, as well as human rights, freedom of assembly and negotiation, a living wage and commensurate rest periods. SAI updates the standard, provides information and training, offers accredited inspectors and collaborates with a network of researchers, economists, charities and trade unions.

Info http://www.sa-intl.org/ Table 7.2: NGO-driven cooperation

Multi-stakeholder initiatives

The Common Code for the Coffee Community (4C)

Country Germany/Holland

Established 2003

Description The Common Code for the Coffee Community Association (4C Association) is an organisation in which all relevant stakeholders from the coffee sector follow one common goal: continuously improving the level of sustainability in the production, processing and trading of all green coffee. Its tripartite membership structure represents the equitable groups of industry & trade representatives, coffee producers, and NGOs and trade unions. Its code of conduct sets environmental and social standards that help to improve both the farmers' situation and the coffee quality.

Info http://www.sustainable-coffee.net/

48

The Forest Stewardship Council (FSC)

Country Mexico/Germany

Established Since 1990- consultation process. 1993 FSC Founding Assembly in Toronto, Canada. 1994 FSC Secretariat Office was opened in Oaxaca, Mexico. 2003 Re-location of the FSC Secretariat from Oaxaca, Mexico to the FSC International Center in Bonn, Germany

Description The Forest Stewardship Council (FSC) is an international network that promotes sustainable forest management. The FSC labels products that meet stringent social and environmental standards through accredited, third party certification bodies. Companies (manufacturers, traders, retailers) can apply for the “Forest Management” label that guarantees the compliance with responsible forest management practices and three “Chain of Custody” labels for wood products.

Info http://www.fsc.org/en/

Roundtable on Sustainable Palm Oil (RSPO)

Country Seat of the association is in Zurich, Switzerland/the secretariat is currently based in Kuala Lumpur, Malaysia

Established 2004

Description The principal objective of the “Roundtable on Sustainable Palm Oil” (RSPO) is “to promote the growth and use of sustainable palm oil through co-operation within the supply chain and open dialogue between its stakeholders”. The RSPO has members representing major players along the palm oil supply chain: the oil palm growers, palm oil processors and traders, consumer goods manufacturers, retailers, banks and investors, environmental/nature conservation NGOs and social/development NGOs. The RSPO is a platform for pragmatic co-operation to contribute to the expansion of sustainable palm oil and its uses.

Info http://www.rspo.org/

The Round Table Codes of Conduct

Country Germany

Established 2001

Description The objective of the Round Table Codes of Conduct is to improve the implementation of labour and social standards in developing countries through corporate codes of conduct. To achieve this aim, Round Table participant groups are setting out to develop a common understanding of how voluntary codes of conduct can be introduced and applied - effectively, transparently and in a spirit of participation. The Round Table comprises representatives of the private-sector, trade unions, non-governmental organisations and government.

Info http://www.coc-runder-tisch.de/ Table 7.3: Multi-stakeholder Initiatives

49


8 Feasibility analysis, implementation and follow-up

In the previous Chapters, you looked into opportunities for improvement along your supply chains. Among options possible for product planning and design, sourcing, transport and logistics, which options are the most feasible ones to implement?

This chapter now aims to help you identify which options are right for your business: prioritizing options, implementing your highest priorities, measuring success and following through with continuous improvement, as

shown in Figure 8.1.

Figure 8.1: Steps required in the project for success

Prioritization of Supply Chain Performance Improvement Options

Once your major goals are aligned and you have highlighted several options, you will want to decide which option would be the most appropriate for your business. There are three major factors that will help you to decide:

Operational analysis

Examine your business, including your organisational capacities and staff competencies. Review your corporate strengths, weaknesses, and potential project barriers. It may help to review the necessities needed for a potential project, and evaluate if your company has the matching resources to plan and successfully execute the project in mind. Is this project a strategic alignment? For example, do you have the capacity to conduct regular monitoring of your supply chain operations?

Implement Project

Step 2 Step 1

Prioritize

Options

Improvement

Step 4

Measurement

Step 3

50

Financial analysis

A classic financial evaluation is warranted even for ideas that aim to create environmental improvements. You may use several financial indicators to compare the feasibility. At the very least, a simple cost-benefit analysis can be used.

Potential for intangible value creation

Intangible benefits can often draw in revenues not quantifiable in a rough financial analysis. Improving customer side environmental issues can improve customer relationships, brand equity and reputation, business continuity, and even strategic alliances. Customer relationships and increased brand reputation attract revenue and also decrease the likelihood that your company could be attacked from negative press. Intangible value can be measured through an expanded cost-benefit analysis, by assigning these intangibles a monetary value. A pilot

project can be helpful to evaluate the intangible value of a proposed action.

Implementation of Options

Once you have prioritized your options, you will want to implement your key improvement technique. This stage might include several procedures, such as the following:

• Establish employee and partnership roles and responsibilities;

• Develop a plan for the project, including necessary resources, implementation of deliverable deadlines, and

schedules;

• Establish coordination points among processes and people;

• Reach out to various stakeholders in the process;

• Prepare schedules to ensure that all the team members are aware of when certain tasks need to be

accomplished.

Performance Follow-up by Indicators

Indicators can help to follow-up whether the options that you have selected for performance improvement of each supply chain function is running successfully. You may like to monitor two major issues, namely the effect on your business success and the impact on the environment and social parties. For example, Schenker uses an emissions calculator to analyse the success of environmental impact reduction with respect to eco-efficiency improvements in the transport function.

51

Schenker’s Online Emission Calculator

When analysing the supply chain network efficiency it is useful to consider some of the best practices towards supply chain optimization, e.g. software that considers distance, weight, and cube volume, asset mix, location, and customer service variables. Newest tools of this kind, such as Schenker’s Online Emission Calculator also take into account fuel and energy consumption and

emissions in supply chain network design with respect to goods being transported via land (and some ferry connections) in Europe. Thus, the interested shippers are able to assess online the environmental impact of their transportation of goods.

Source: http://www.schenker.com/english/services/environmentalServices/emissionCalculationOnline.html

Box 8.1 : The Online Emission Calculator

In order to measure the business value creation potential by supply chain initiatives, you might like to check whether the initially identified (see Chapter 6) risks and opportunities have already been tackled.

52

Discover new grounds in marketing and consumer

relations

Ready Planning and pre-assessment

Steady

Detailed assessment, target setting and option identification

Go


53


Month


In the remaining three chapters, issues regarding the consumer side of your product chains will be explored. These issues, when they are well addressed, can increase stakeholder value for your company. It might translate into direct financial revenue growth through market innovation and expansion, and enhance customer equity through building better relationships with customers, suppliers, and NGO’s. Retailers in developing countries will especially learn tips on how to open into new markets and create innovative marketing techniques.

As a retailer, you provide customers with the products and services they want and need. How can you add even more value to your products and services through enhancement of their environmental and social attributes? What opportunities lie along the product life-cycles? Location of these opportunities will be the focus of this

section.

Table 9.1 describes the three main areas of the consumer phase of your environmental and social work. The second column shows questions that can be asked to scope the areas that can create the most value for company.

Main Scope Areas What environmental and social topics can create the most value for my company and customers?

Product Sales: More sustainable products

• What products and services can help create value for our company through increasing consumer trust?

• Can we reduce life-cycle costs of products? Can we ultimately reduce costs for our customers and us?

• Can we extend into untapped areas to become a market leader and increase our profitability?

Customer use of products: Reduce

use impacts

• How can we build customer relationships by improving the quality of products and services addressed, for example, to support safe and effective use of products?

• Is there a potential to reduce cost of ownership to customers and improve our service offerings to keep customers returning to us and not to our competitors?

Product Disposal: Decrease waste and improve recycling &

reuse

• Can we encourage safe and effective disposal of products to show responsibility through the product life?

• Can we prolong asset life and increase material productivity by recovering some raw materials in partnership with our suppliers or producers?

• In what ways can we assist our customers with product disposal to improve our customer relationships?

Table 9.1: Scoping questions to decide what areas of the consumer side to focus on in your business.

To better understand

the retail role in the full life-

cycle of a

product, see UNEP’s

Greening

Shops and Saving Costs Guide, pg. 18.


54

Exploring Stakeholder Trends for Sustainable Products

Products with improved environmental and social attributes have a lot of potential for revenue growth. They provide serious opportunities for expansion into new markets. These markets are attracting more and more

consumers and are growing fast.

These product portfolios also constitute a good value to your brand equity and reputation. They associate well with developing solutions for latest consumer concerns such as safe foods free from foot and mouth disease (FMD), e-coli, carcinogenic chemicals, etc. Latest lifestyle trends such as more climate friendly consumption, less fattening food consumption, comfortable clothing, etc. go also hand in hand with the concepts behind sustainable products.

Did you know that…

Ethically produced product demand is likely to have the greatest positive impact on shareholder value for companies over the next five years.

Source: McKinsey Quarterly, 2006

• In 2004, the world market value of organic foods hit 23.5$ billion. In the US, the organic market is expected to have a 20% annual growth rate, compared to 3% for the rest of the industry (Pas, 2005).

• In North America (Can/US/Mex) retail sales estimates for Fair Trade products increased from $US 125 million in 2001 to $US 472 million in 2004, an increase of 187%. In the Pacific Rim (JP/AUS/NZ) retail sales between 2001 and 2004 increased from $US 10.57 million to $US 17.51 million, an increase of 66%. In both regions, coffee plays the dominant role although tea plays an important role in Japan (Fair Trade Trends in North America and the Pacific Rim, 2005).

• When considering non-labelled and labelled products together, total annual Fair Trade retail sales in 2005 are estimated at 660 million Euro, a 154% increase over the year 2000 (Fair Trade in Europe, 2005).

• Whole Foods, the largest retailer of organic / natural food products, has seen a staggering increase in sales in 2006, with a net profit increase of 5.3% from 2004-2005, with individual store sales increasing 13% three years in a row! (Datamonitor, 2005).

Box 9.1: The increase in ethically produced products.

If you are located in a developing country, you can increase store value through educating your consumers on sustainable products, use, and recycling issues. You might also have financial power and large customer base to help improve the economy for locally produced products. Working within the local market and local environmental and social NGOs, you can strengthen your customer base and as well improve the economic atmosphere for your retail shops.

Consumer issues are an important retail value driver!

• Marks and Spencer uses consumer surveys to measure the consumer trust levels of their Free Range Egg Advertisements. They have found that these advertisements have helped increase consumer trust levels (Almaani et al, 2006). M&S tries to find the most important environmental and social issues that are guaranteed to build consumer trust, to create value and eventually to increase sales.

• Sainsbury’s listens to consumer issues: "Our customers expect us to have a decent supply chain, where suppliers are paid properly and their workers get a decent living wage." "Customers fall ‘along a spectrum’: some ‘have zero interest’ in green issues, but others are already using their purchasing power, and that's increasingly reflected on the shelves. There's a much greater appetite [within Sainsbury's] now to offer customers something other than strict end performance and price... We want to move them along the spectrum, so more are asking questions of us, and challenging us too." Source: Quote from Ms. Austin, Sainsbury’s Environmental Manager

Box 9.2: Consumer Issues as a retail value driver

Avoid

Risks! Do not overlook

consumer

product issues!

Take advantage of

opportunities! Can your store break into new

markets?

55

Value Hidden in Product Use Phase

Product use phase of consumer products is the phase where the highest cost of ownership and the most environmental responsibility are located. Hence, in this phase lie many opportunities to enhance consumer

satisfaction by enhancing your service levels.

Especially when purchasing products to be used for long periods of lifetime, consumers look for high service levels at low cost. Environmental aspects well relate to the reduction of the cost of ownership of your products. For example, studies have shown that during the lifecycle of a washing machine, the use-phase, compared to production and disposal, has the greatest amount of energy consumption, air pollution, water pollution, solid waste, and water consumption (Ottman, 1998).

You might educate your consumers about the real cost of ownership. This cost obviously extends beyond the initial purchase price and corresponds to the expenditure over the lifetime of a product. Your customers need to consider the cost of repairs and maintenance, and if relevant also the cost of operating. For instance, in the case

of a refrigerator, different models with the same capacity can vary dramatically in the amount of electricity they use. An A-class model can lead to 20% annual savings compared to an average efficient model. As a result, you might help your consumer save money by buying the more expensive, more energy-efficient model. Scientists are also claiming that a growing number of consumers are claiming that environmental performance measures of products affect their purchasing behaviour (Sammer and Wüstenhagen, 2006).

Communication of real cost of ownership may increase service value.

Cost of ownership is an issue in sales of many more product groups. For example, a life-cycle analysis of a pair of trousers sold at Marks and Spencer stores found that 76% of the energy consumed in connection with the trousers was from the customer’s washing, drying, and ironing them. The One Planet Business Flagship Document states that 81% of the product emissions and material use for a car stem from the use phase.

Box 9.3: Increasing the service value through communication of real cost of ownership

An opportunity might definitely be to educate consumers about the cost of ownership and make them aware of their increasing environmental responsibilities during product use. Guidance in reduction of cost of ownership, technical assistance for decrease of environmental load during use phase will increase service level and will lead to increased stakeholder value.

Have you

considered making your

consumers

aware of the real cost of

product ownership?

56

Product use often causes the most environmental damage throughout product lifecycle: A look at the ICT sector.

With the growth in the IT sector, consumers have a larger role in the influence of environmental impacts. In the case of digital distribution of music, consumers have a greater responsibility for the environmental impacts compared to other means of sales of music. This means that consumers would need to invest more energy and material (such as computers and CDs to burn) in order to extract the actual function from the system in comparison to the producer and the retailer (Kuhndt et al., 2003). Although policy makers have not yet officially recognised these impacts, there is an approaching discussion in the sustainable consumption arena among NGOs and consumers. For example, telecommunication companies invite suppliers to discuss the shifting of burden issues. Those retailers who can work with these issues can avoid risk and build relationships with customers and stakeholders.

Figure 9.1: Material intensity in different types of purchasing

Box 9.4: Environmental impacts in the ICT sector during consumer use

Understanding Stakeholder Concerns in Disposal

In the final phase of the product life-cycle, disposal, governments and consumers are more interested in retail

involvement. The idea of “extended producer responsibility”, lengthening a producers’ responsibility until the products end of life, is increasing. For example, retailers collaborate with producers for the collection of wastes, from bottles to batteries. Also, with growing concern over e-waste, represented by Waste Electrical and Electronic Equipment (WEEE) in the EU, retailers may be forced to pro-actively work with these issues.

By improving networking and partnering with producers and other stakeholder groups, retailers can increase resource efficiency, decrease costs, and have an added bonus of cutting raw material use. For example, in the developing world, retailers are often the most convenient outlets for consumers. As such, their participation in waste programs, by providing consumer services for the repair and recycling/waste collection, could greatly improve recycling and reuse in these countries. Furthermore, these retailers would be able to take great advantage of improved customer relationships through servicing their continued use of products and by reaping

the profits of reusing waste (See also Box 9.5 below).

Turning Waste Electronics into Revenues to Create Added Value….

Electronic waste is being strongly targeted by law markers and NGOs alike. NGOs such as the Basel Action Network (BAN) and Greenpeace have recently exposed several electronics and waste corporations for improper recycling of materials, including sending them to foreign countries, where they pollute the environment and endanger many lives. Policy makers are responding. The EU recently passed the WEEE initiative, which charges the manufacturers with being responsible for their products until end of life. Retailers like R.U.S.Z., short for Repair and Service Centre in Austria, are responding. R.U.C.Z. collects used electronics from waste dumps to salvage their spare parts to rebuild and resell old electronics. Furthermore, they also employ locals

For more about

disposal

liability and responsibility

issues, see

Greening Shops and

Saving Costs,

pg. 42.


57

over the age of forty-five, who were thought of as unemployable.

Their system has had a great impact on the community: • The reuse of 2000 tons of waste (including 1500 tons of electronic waste)

• The re-instatement of elderly into the work-force • Providing the community with DIY lessons

Furthermore, this impressive response has aided R.U.S.Z to: • Have low overhead costs: by using waste products, they have little materials cost • Gain community and local support

• Become part of a larger network of reparations professionals • Operate ahead of legislation and thus not be worried about its affects on them

R.U.S.Z has been able to reap the benefits of added value through incorporating environmental and social practices in to their business model. Furthermore, with increased stakeholder interest in waste, they are ahead of the game.

Source: www.treehugger.com Box 9.5: Turning Waste Electronics into Revenue

58

How to?

There are several ways to locate opportunities whether in sales, use, or disposal. The following tables will help you recognize what issues are the most important to your retailer. Table 9.2 focuses on how to find what sustainable product options you can offer, while Table 9.3 focuses on how to understand what issues you can deal with for the use and disposal phases of your products.

Tools to Understand Consumer Wants and Needs for Sustainable Products

Tool How Example/ Further Information

Market Survey

Create your own survey to ask your consumers their opinions on sustainable products

• M&S survey of their consumer trust levels: read more about it on their CSR report downloadable at: www2.marksandspencer.com/thecompany/investorrelations

Market Research

Take advantage of others’ consumer research on consumer behaviour and sustainable products. While marketing research is normally thought to be expensive, the internet can provide great resources, at little or no cost.

• Ernst and Young: Consumer Trend Center: www.ey.com/us/consumertrendcenter

• Meyer, Arnt. (2001) “What’s in it for consumers? Successfully Marketing Green Clothes.” Business Strategy and the Environment.

• Carrigan, Marylyn and Ahmad Attalla. (2005) “The Myth of the Ethical Consumer-Do Ethics Matter in Purchase Behavior?” Journal of Consumer Marketing.

• Jensen et al. Consumer Opportunities and Interest in Purchasing Green Electronic Products. Danish Ministry of Environment. www.mst.dk

Marketing Theory

New theories about selling and marketing sustainable products and what opportunities are available for business are researched. They usually include examples of “how to do it” in practice. Several non-profit and research based organizations have also popped up on the web, offering services to companies and to the average person who want to make a difference.

• McKenzie-Mohr, Doug and William Smith. (1999) Fostering Sustainable Behavior: An introduction to Community-Based Social Marketing. Book.

• Belz and Karstens. (2005) Strategic and Instrumental Sustainability Marketing in the Western European Food Processing Industry: Conceptual Framework and Hypothesis. http://www.food.wi.tum.de

• The social marketing institute, a non-profit dedicated to creating more sustainable behaviours: http://www.social-marketing.org/

• The sustainable marketing knowledge network. A consortium of researcher groups offering a web based resource. http://www.cfsd.org.uk/smart-know-net/

59

Stakeholder Meetings

Involve your local stakeholders, including customers, community members, suppliers, employees, government, listen to their interest and find out about various perspectives on sustainable products. Stakeholders can be involved via consultations (meetings) or even partnerships.

• From Words to Action: Stakeholder Engagement Manual. http://www.greenbiz.com/toolbox/reports_third.cfm?LinkAdvID=65028

Table 9.2: Tools to understand consumers’ wants and needs on sustainable products

CHECKLIST OF QUESTIONS How to target life-cycle phases of my products and decide what is most important for my business and the environment?

Yes 1. Have you conducted studies or seen any life-cycle evaluations on the major product categories in your store? No

Yes 2. Have you received negative consumer feedback about a product that you carry that is not sustainable where you can source a more sustainable option?

No

Yes 3. Can you better inform consumers about the sustainable options you do carry?

No

Yes 4. Have you received producer feedback regarding potential for improved product use through product improvement? No

Yes

Sust

aina

ble

Prod

ucts

5. Are you aware of potential legislation that may outlaw certain products that you carry?

No

Yes 6. Are you aware of life-cycle cost structure of your products?

No

Yes 7. Are there areas that you could more proactively inform consumers of how to reduce life-cycle costs of products (e.g. energy, material)?

No

Yes 8. Does your company have expertise in use of its products that it could offer customers as an added service?

No

Yes

Use

9. Are you aware of possible legislation requiring changes to use of products?

No

Yes 10. Are you aware of any products that you carry that causes your consumer particular difficulty to dispose of?

No

Yes 11. Does your company have particular expertise in disposal of its products that it could offer customers as an added service? No

Yes 12. Are there areas where you could more proactively inform consumers of how to dispose of products? No

Yes

Dis

posa

l

13. Are you aware of possible legislation requiring changes to the disposal of products?

No Table 9.3: Checklist of Questions to target the improvement of use and disposal phases of products

60

References

Almaani, Mutaz, Patricio Aylwinblanco, Candida Barbato, Diego Benavides, Maloy Burman, Philip Cacouris, Carlos Palacios, Jan Sorensen, Tomas Sorgeloose, Christophe Vanier, Gourishankar Vemali. (2003) “Retailer’s Communication to Promote Sustainable Consumption.” Paris: UNEP-HEC School of Management.

BBC. The World Challenge. http://www.theworldchallenge.co.uk/sunny.php

Birchard, Bill. (2005) Nonprofit Muscle. Chief Executive. No. 205.

CSCP, Policy Reinforcement for Environmentally Sound and Socially Responsible Economic Development in China (PRODEV). Training Slides on Think 2 'Setting the Stage: Thinking Circular Economy - Concepts and Principles'. 2006.

Datamonitor. (2005). Organic Food in Europe: Industry Profile. London: Datamonitor.

European Environmental Agency. (2005) Household Consumption and the Environment. Copenhagen.

Fair Trade Advocacy Office, 2005. Fair Trade in Europe 2005. Facts and Figures on Flair Trade in 25 European Countries

Green Futures (2006) Number 60 September/October Issue. Published by the Forum for the Future.

Greenpeace. http://www.greenpeace.org/international/news/kfc-180506 Last Accessed: 28. June 2006.

Kuhndt, Michael, Burcu Tuncer, and Christa Liedtke. (2003) “Life Cycle Approaches to Sustainable Consumption. Product-Service Systems: Matching Consumer Acceptance and Business Preparedness.” Final Report. Wuppertal; Wuppertal Institute for Climate, Environment and Energry; Triple Innova.

McIntosh, Jay. (2004) 2005 Consumer Trends Report. Ernst and Young LLP. [online] Available: http://www.ey.com/us/consumertrendscenter

McKinsey Quarterly. (2006) Global Survey of Business Executies. McKinsey Quarterly. No. 2; pp 33-39.

Pas, Renee. (2005) “Meeting Demand for Organics.” Beverage Industry. Vol. 96 Iss. 10; pp. 47-50.

Reynolds, Michael. (2006) “Remaking Modernism.” Time Magazine: Style and Design. Summer 2006. Supplement to Time.

Sammer, Katharina and Rolf Wüstenhagen. (2006) “The Influence of Eco-Labeling on Consumer Behavior-Results of a Discrete Choice analysis for Washing Machines.” Business Strategy and the Environment. pp. 185-199.

UNEP, The Global Compact and Utopies. (2005) Talk the Walk: Advancing Sustainable Lifestyle through Marketing and Communications. UNEP.

UNEP. (2005) Asian Retail Sector and Sustainability.

61

Figure 10.1: Sustainable Lifestyles Marketing (Source: UNEP, 2005)

Discover new grounds in marketing &

consumer relations

Month

10 Detailed assessment and option identification

The previous chapter tried to introduce you to some of the stakeholder demands and opportunities related to your products’ specifications, their use, and disposal. Once you identify these, the question is how to tackle them. In this chapter, we will introduce various options ranging from sustainable lifestyles marketing techniques, choice editing to product service systems (PSS).

Marketing for Sustainable Lifestyles and Increasing Sales of Sustainable Products

As explained in Chapter 9, sustainability issues linked to the sales side have the potential to create opportunities

for your business. As shown in Figure 10.1, “sustainable lifestyles marketing” includes selling environmentally and ethically sound products, encouraging sustainable behaviours, and marketing responsibly. This type of marketing can be perfect for changing attitudes towards sustainable consumption and encouraging people to act based on sustainability principles.

Sustainable lifestyles marketing can especially provide solutions to expand your customer base for sustainable and ethical products. It can help to analyze product innovations, open new markets and expand your revenues.

In fact sustainability issues closely link with many product quality aspects such as healthfulness, safety,

functionality, ease and cost of use, durability, packaging, etc. Sustainable lifestyles marketing might be an effective tool to better position the attributes of your products and create the market differential you seek.

To read about the

importance of

marketing, see Greening

Shops and

Saving Costs, pg. 48.


62

There are different techniques that you might use for applying sustainable lifestyles marketing. For example,

unique advertising proposition technique, which concentrates on a specific benefit the consumer can get by using your product, might be a good way of reaching reach out to consumers beyond the store. Co-op and Waitrose have been recognized for their efforts to inform consumers about sustainability issues. Co-op Sweden incorporated sustainable lifestyles marketing in their ethically harvested egg campaign: they used green products to incite consumer ethical consciousness in a thought provoking, emotional, and non-imposing manner. One of the ads, shown in Figure 10.2, won a CRESTA award in 2004 for creative excellence in a poster campaign. Co-op also uses the slogans, “better for me and tastes better” to show consumers that sustainable products have added benefits for them personally. Slogans like these that show consumers they can make a difference by choosing sustainable products, can improve consumer behaviour.

Figure 10.2: CO-OP Sweden for Sustainable Eggs; caption reads: “We’ve stopped selling eggs from cages hens. Take 219 people with

you into this bus and you’ll understand why.”

Source: UNEP. Creative Gallery on Sustainable Communications.

Another very popular use of sustainable lifestyles marketing is in-store techniques to incite consumer

awareness. Eroski, a Spanish retailer, has tried to take advantage of the growing Fair Trade market, applying in-store promotions and customer awareness-raising sessions. In-store techniques, including placement for visibility, shelf tags, and other prompts, ensure that customers are aware that the products exist and are accessible. Studies have shown that one of the main reasons that consumers do not buy products is because they do not know they are sold at their local stores (Vermeir and Verbeke, 2006). Eroski’s campaigns were successful: Eroski’s sales of Fair Trade products have increased four fold compared to a national two-fold increase. Other retailers’ campaigns include taste testing and inviting the local farmer to talk about his products. One retailer in Sweden that brought in a local farmer to promote his organic products saw a 100% increase in sales of organics (Ekologiskt marknadscentrum, 2006). Since 40-50% of shoppers make unplanned purchases,

presenting new options for consumers in a fun way can largely increase your sales too (Gagnon and Chu, 2006). These retailers have improved their efforts by working with local NGOs, such as Fair Tade and other ethical product organisations, which can provide them with added product expertise and knowledge, in the form of information package or employee training.

A third, and possibly more effective approach to improve the way your store handles sustainability is not to stock unnecessarily damaging products. This initiative, coined “choice editing”, takes the burden off of consumers and gives them only sustainable options. For example, leading world retailers such as Carrefour, the Warehouse and the Home Depot have policies to only source wood from sustainably managed forests. Also, Sainsbury’s and Safeway Market have developed policies to only source seafood from sustainable fisheries, such as that certified

To learn other

methods on

how to market sustainable

products see

Greening Shops and

Saving Costs,

pg. 46

http://www.unep.fr/pc/retail.

To learn more about

Eroski’s

campaign efforts, see

UNEP

“Greening Shops and

Saving

Costs”, pg. 47.


63

by the Marine Stewardship Council (MSC) (Storebrand Retail Investments, 2003). Comet has made the

commitment not to stock any appliances below the C level energy rating (SCR, 2006). Many retailers have been able to drive the market for these sustainable products through a combination of choice editing and marketing. Retailers are being recognized for their work, which helps to increase their brand value and reputation. For further information on driving the market for sustainability see Box 10.1 below

Did you know that new technologies are driving marketing and consumer shopping?

• Today, among TiVo users (a digital TV satellite service), over 77% are fast forwarding through commercials during prime time television. Novel and innovative means of advertising are being developed to draw attentions of consumers.

• By 2010 over a billion people will be online globally; the internet is becoming the standard of the global shopping experience.

Source: Gagnon and Chu. Retail 2010. 2006

Waitrose, a major food retailer in the UK, has made a concerted marketing effort about sustainability on their website, just as consumers use websites more often for shopping. Consumers can use the website to make informed decisions about their product purchases, understand organic and Fair Trade, and virtually “meet” the producers among others. The site works to portray Waitrose’s sustainable options, and display their importance in a non-imposing way. Waitrose has found that the information on their website “helps build trust in the brand and with it, customer loyalty.” Furthermore, their overall dedication to sustainability and sustainable lifestyles has put them on the top of the National Consumer Council’s list of green supermarkets in the UK.

Source: Interview with Michael Simpson-Jones, Waitrose Buyer and Waitrose website: www.waitrose.com.

Box 10.1: New Technologies are driving marketing and consumer shopping

A fourth way of creating revenues through resource efficient business models can be the application of the concept of product service systems (PSS). A product service system is similar to leasing and renting products. Instead of concentrating on unit sales of products, service-oriented solutions can be offered (Mont, 2004). This system might be more affordable for local communities while providing environmental benefits. For example, Sunlabob Rural Energy Ltd in Laos leases normally expensive solar energy equipment to rural communities that cannot afford energy and have poor connections to the urban centres. The residents receive a viable energy source at low cost and Sunlabob is a thriving business: it took advantage of this untapped market (BBC, 2006).

Similar companies such as SUNEdison operate in the US. As long as the client purchases the energy, SUNEdison will install solar panels on the client’s roof. For another example on PSS see Box 10.2 below.

Leasing

products can provide added

services and

sustainable development

benefits,

especially in the

developing world.

64

Car-Sharing schemes as a new product service system

Car-sharing schemes, a quintessential example of a PSS, has strongly taken hold worldwide. It has started with Sefage in Switzerland in the 1940s and now includes schemes such as Flexcar and Zipcar in North America, GoGet in Australia and Streetcar in England. Over 330,000 people in the world use car-sharing schemes, sharing 10, 500 vehicles (Shaheen, 2006). The idea of car sharing is that individuals gain the freedom of car access, by joining an organization that maintains a fleet of cars, without the burden that comes with owning a car. For the user, car sharing is more cost effective for the first 10,000-16,000 miles. Furthermore, businesses have a strong advantage with more governments offering grants and favouring car-sharing programs, as car-sharing schemes are becoming more integrated into urban transport schemes and zoning restrictions. Also expected is a strong growth among business, fleet, transit, university and household markets for car-sharing (Shaheen, 2006).

Source: Worldwatch Institute: Vital Signs. 2006. Box 10.2: Car sharing schemes as a new product service system

Communication of Sustainable Product Use

In the product use phase, you may tap enhanced service levels opportunities. As mentioned in Chapter 9,

indicating opportunities for reducing the cost of ownership or giving technical assistance for reducing environmental damage during use, you can better communicate quality attributes of your products and enhance customer relationships.

To indicate life-cycle cost of products, in-shop campaigns can be effective. For example, OBI in Germany has initiated a campaign 'Aktion No Energy', with which they raise awareness among their customers on the use of electricity by different electrical appliances. They used a mix of marketing techniques along with added services. For the deposit of EUR20, interested individuals are able to borrow a tool for measuring energy consumption of their electrical appliances at home and to assess the savings potential. In addition, OBI provides brochures on energy savings at home, addressing issues like lighting and stand-by electricity consumption directly on their

website. In a pilot program, OBI placed the most energy efficient items in locations where they were easy for consumers to find. For another example on awareness raising on energy efficiency see Box 10.3 below.

Another example for awareness raising on use phase impacts is the Washright campaign. It aims to inform consumers about how to wash more efficiently. It is also a good example of this industry coming together to meet the demands of consumers and NGOs alike. The campaign is run by A.I.S.E, who represents soap, detergent, and maintenance industries, and has reached over 70% of the European population through its TV commercials and other advertisement to promote proper use of detergents and machinery for doing laundry. Remarkably,

over 50% of consumers surveyed in a study remembered the ads! Its outreach has encouraged the detergent industry to even put Washright’s message on detergent packaging.

To learn more about

labelling and partnerships, see Greening

Shops and Saving Costs,

pg. 43


Figure 10.3: Washright

Campaign logo-applied to

packaging of companies in the

campaign.

65

Home Depot expands their customer relationships through extended value and services.

As the third largest retailer, The Home Depot, a DIY, understands that value and reputation are created through increased customer service and satisfaction. They extend their services to include environmentally friendly use of their products, by not only showing consumers energy efficient products on their website, and pointing them out in the store, but also explaining energy efficiency issues and helping them to save money in their home by being more energy savvy. Home Depot teams up with the US Environmental Protection Agency for this information. They also give consumer tips on design and installation, and other home improvement know-how, which can cut unnecessary wastes and expand their outreach to consumers and the community. They also rent tools to customers.

Box 10.3: Home Depot expands their customer relationships through extended value and services

BP, in conjunction with UK non-profit Targetneutral, allows customers to calculate their car’s emissions via the web, find out how to reduce their emissions and learn more about projects to minimize CO2. The program is part of a push to make BP’s UK fuel tankers carbon neutral. As part of the program, they will make a contribution to the fund for customers using their Nectar cards. The Nectar card is a loyalty card used by a consortium of UK retailers, including Sainsbury’s, Debenhams, Barclaycard, and BP. Roughly half of the UK population has a

Nectar card. Under the current scheme, consumers can pay only £6 to reduce one tonne of CO2 EUR20 per year.

Ensuring Proper Consumer Disposal

In the final phase of the product life-cycle, retailers can encourage proper disposal, recycling or even decrease the need for material use (for example see Box 10.4 below).

Australian retailer Paddy Pallin lengthens the life of their clothing through take-back systems. This outdoor gear retailer offers $50 AUD to customers towards the purchase of shoes when they return

their old shoes. These shoes are then donated to Porters Progress an organisation that lends and leases essential outdoor gear to porters in Nepal. Trekking companies make a fully refundable deposit on the gear to provide safety and comfort for the porters and then receive all of the money back when they return from their trip to the Himalayas. Porters Progress can now provide clothing for up to 500 porters at once and Paddy Pallin shops improve their customer relationships through essentially offering discounts on shoes and brand reputation through showing that they care for the environment and society (www.portersprogress.org and treehugger.com).

66

Vodafone opens new business opportunities: recycling phones for emerging markets…

• Americans discard 130 million cellular phones annually, creating 65,000 tons of toxic trash, from PVCs, to brominated flame retardants

• In 2006, Vodafone collected 1.37 million phones for reuse and recycling

Vodafone is heavily involved in the recycling and reuse of their mobile phones, which can create large amounts of waste, but also increase telephony in developing countries. After a thorough investigation of the most important consumer sustainability issues, which could have the greatest positive financial impact, Vodafone launched initiatives to raise awareness and encourage recycling. They collect used handsets in their retail stores and have introduced incentives to stimulate the recycling rates. The phones are then sold on developing country markets at a price roughly 62% cheaper than new phones.

• In October 2005, Vodafone Italy piloted a programme at retailers offering free air time or points if they returned their old phone. 9,400 handsets have been collected and the program will be extended.

• In the developing countries they are also supporting a handset-recycling programme to resell old phones and breakdown phones into their component parts for reuse. Programs in Egypt and Albania already exist and they are working on a program in Romania.

• Vodafone established new partnerships for this project. They commissioned the NGO Forum for the Future to research recycling and reuse possibilities. They are also participating in the Mobile Phone Partnership Initiative, as part of the Basel Convention on Waste.

• These efforts, as well as others have helped Vodafone become #1 among Fortune 500 companies in Accountability, a rating done by CSRnetwork and AccountAbility. They also highlight that the recycling programs have been great for building new markets, as well as customer loyalty and satisfaction in both new and current markets.

Figure 10.4: Destination of reused mobile phones Source: Vodafone.com

Box 10.4: New business opportunities through recycling phones

In some countries where retailers face pressure regarding environmental performance from politicians and their peers, they can turn to opportunities on the product disposal side. Finch and Smithers of the Guardian (2006) noted that packaging in British grocery stores has increased 12% from 1999 to 2005, which the environmental minister finds unacceptable. He is urging consumers to take action and encourages them to throw the packaging away at the checkout till. Tesco, in an effort to appease consumers is encouraging them to bring their own bags by giving them one point on their customer loyalty card every time they are able to replace a plastic bag with their own bag. This incentive is part of their commitment to decrease carrier bags by 25% over the next two years, but also to improve Tesco’s image among consumers. Similar schemes exist at other retailers, like Paddy Pallin,

who donate 20 cents to an environmental cause every time a customer does not have to use a plastic carrier bag at one of their stores.

Can your company open new

markets through take-

back schemes?

67

How to?

The following technique charts might help you to develop some options to improve sales of sustainable products, to enhance visibility of use phase improvements and/or to encourage proper disposal.

Technique Chart 1: Improving Sales of Sustainable Products

Technique Benefits Example

Exposure • Raise product awareness • Increase unplanned consumer purchases

• Improve customer relationships

• Special and noticeable placement in the store • Good shelf placement: eye level

• TransfairUSA holds a shelf contest year at retailers for Fair Trade product displays. To see examples, visit www.transfairusa.org

Demonstration • Add human touch to sales

• Answer questions and tell more about the product

• Increase unexpected purchase • Reduce harmful product myths

• Allow the consumer to experience the product

• Give recipes • Provide accurate use tips • Home Depot provides in-store training to their DIY

consumers. Visit www.homedepot.com for more information

Prompts and Packaging Information

• Draw attention to the product

• Add valuable easy-to-read information

• Use shelf tags

• Provide signs at point of purchase • Show environmental and social impacts on packaging,

Timberland sets a good example: www.timberland.com: look up any shoe & click “nutritional label

Employee Training

• Allows employees to answer customer questions

• Provide greater understanding among employees about a product’s importance and its accurate placement

• Motivate your workforce

• Explain what the product means

• Allow them to think of new solutions

Website • Add more information than you can do in-store

• Increase use by customers for shopping

• Add sustainability with other product information • Explain the added value in the price sheet

• Waitrose provides excellent information to consumers on their website. Visit www.waitrose.com.

Emotional Advertising

• Draw an emotional affiliation between you and the consumer

• Improve consumer relationships • Help to explain the added value

• Inform consumers of what you are doing and why

• Show the consumer that they can make a difference • Use original techniques that draw attention: Stonyfield

Farm example from UNEP “Talk the Walk” (www.unep.fr/sustain, “Advertising” section)

Choice Editing • Increase customer value and confidence

• Be a market leader: don’t get caught by new legislation

• Get rid of unsustainable products and offer more sustainable versions

• Marks and Spencer only carries Fair Trade coffee at their stores: visit www.marksandspencer.com

• Read more about choice editing in the “I Will If You Will” Document (http://www.sd-

68

commission.org.uk/publications/downloads/I_Will_If_You_Will.pdf) or in the ‘Looking Back, Looking Forward Lessons in Choice Editing for Sustainability - 19 Case Studies into drivers and barriers to mainstreaming more sustainable products’ (http://www.ncc.org.uk/nccpdf/poldocs/NCC124_looking_back.pdf May 2006) Both documents are published by the Sustainable Development Commission of the UK

Product Service Systems

• Open new markets and become a leader in that new market

• Reach out to customers who need a different alternative

• Invest in people, rather than materials

• Allow leasing and renting of low-use products

• Expand expensive products to low-income markets through service systems

Table 10.1: Improving sales of sustainable products

Technique Chart 2: Enhance Visibility of Use Phase Performance Enhancements


Website • Increase customer knowledge of product use at home

• Expand customer relationships and increase customer life-cycle value

• Add proper/efficient use examples, like H&M: http://www.hm.com/us/abouthm/quality

• Show environmental use impact

Packaging information

• Customer can bring information home and read while using product

• Adds greater total value to customer purchase

• Tips on proper use, such as saving energy, decreasing chemical usage

• Create fun and memorable information for children about the environment

Partner with others

• Increases employee knowledge base • Increases consumer trust and

stakeholder value

• Improves relationships with stakeholders, such as suppliers, NGOs and local community

• Partner with NGOs to increase knowledge of use options, through leaflets, in-store displays, and cross-advertising

• Work with suppliers to improve product use performance

• Cooperate with the community on a plan to improve local energy use

• B&Q has worked with a number of partners on various environmental issues. For more information see: www.diy.com

Contact consumers post-purchase

• Expands personal relationship beyond the store

• Improves customer loyalty • Encourages repeat purchase

• Contact customers via e-mail, phone, or text-message with tips on proper use

• Add information to customer magazines about sustainable product use and cost savings tips

Table 10.2: Enhancing Visibility of Use Phase Performance Enhancements

Technique Chart 3: Encourage Proper Disposal


Website • Increase customer knowledge of proper disposal

• Expand customer relationships and increase customer life-cycle value

• Tigerdirect Electronics allows consumers to return their used electronics for proper disposal. See: http://www.tigerdirect.com/sectors/recycle/index.asp

In-store • Increase store traffic • Add collection depots for batteries and other small

69

disposal • Adds greater total value to customer purchase

• Improves social responsibility profile • Decreases your environmental footprint and

potential for item reuse • Increases preparedness for legislation

electronics

• Collect carrier bags and product packaging • Incorporate disposal pick-up in delivery routes for

larger items

Partner with others

• Increases employee knowledge base

• Increases consumer trust and stakeholder value

• Improves relationships with stakeholders, such as suppliers, NGOs and local community

• Partner with waste management companies to improve product disposal awareness

• Cooperate with the community on a take-back scheme

Product Service Systems

• Expand personal relationship beyond the store

• Create new markets for your products • Encourage repeat purchase

• Add increased consumer services and in-store contact

• Provide potential for material re-use

• Improve leasing of expensive systems in low-income areas, i.e. energy materials

• Lease low-selling / low-use items • Read more about PSS on SusProNet:

http://www.suspronet.org/

Table 10.3: Encouraging proper disposal

70

References

OBI. http://www.obi.de/de/company/de/Umwelt_und_Soziales/Energie_sparen/Aktion_No-Energy_1.html

Paddy Pallin. www.paddypallin.com.au

www.portersprogress.org

www.treehugger.org

Shaheen, Susan. Car-Sharing Continues to Gain Momentum. Vital Signs 2006-2007. Worldwatch Institute, New York. 2006.

Storebrand Retailer Investments, 2006

Sustainable Consumption Roundtable. I Will If You Will. 2006.

Julia Finch and Rebecca Smithers. “Too much packaging? Dump it at the checkout, urges minister.” The Guardian, 2006.

71


Month 11


In Chapter 9 and Chapter 10 you explored issues regarding the consumer side of your product chains. You now have many options in hand that you might implement. How can you choose the most cost effective options? Which option might bring the highest stakeholder value? How to measure success rate for these actions?

This chapter now aims to help you identify which options are right for your business: prioritizing options, implementing your highest priorities, measuring success and following through with continuous improvement, as shown in Figure 11.1.

Figure 11.1: Steps required in the project for success

Implement Project

Step 2 Step 1

Prioritize

Options

Improvement

Step 4

Measurement

Step 3

72

Prioritization of Options

Once your major goals are aligned and you have highlighted several options, you will want to decide which option would be the most appropriate for your business. There are three major factors that will help you to decide:

Operational analysis

Examine your business, including your product offerings, staff competencies, and business capabilities. Review your corporate strengths, weaknesses, and potential project barriers. You may also want to review current news and “hot” topics: where can your business fit? It may help to review the necessities needed for a potential project, and evaluate if your company has the matching resources to plan and successfully execute the project in mind.

Is this project a strategic alignment? For example, do you have the corporate knowledge to create a sustainable lifestyles marketing scheme or would your company be better off creating a take-back scheme?

Financial analysis

A classic financial evaluation is warranted even for ideas that aim to create environmental improvements. A

discounted cash flow (DCF) is probably the most widely used tool to understand financial payback. A DCF determines the present value of future cash flows using the appropriate discount rate. A DCF may be able to show you that investing in a project now could save you big money (or not) in the future. At the very least, a simply cost-benefit analysis can also be used.

Potential for intangible value creation

Intangible benefits can often draw in revenues not quantifiable in a rough financial analysis. Improving customer side environmental issues can improve customer relationships, brand equity and reputation, business continuity, and even strategic alliances. Customer relationships and increased brand reputation attract revenue and also decrease the likelihood that your company could be attacked from negative press. Many companies, even Wal-Mart, are trying to improve their reputation by adding to their environmental portfolio. Improving customer relationships also helps to gain repeat and loyal customers. Business continuity and strategic alliances can be created through improving your products, via supply chain improvements, and reaching out to new partners, such as NGOs and even policy makers. Retailers such as Kesko and Co-op in Europe are creating partnerships with NGOs, such as Fair Trade and organic organizations, to improve sustainable product marketing. A project’s

potential for intangible value creation can be a large bonus for your organization.

Intangible value can be measured through an expanded cost-benefit analysis, by assigning these intangibles a monetary value. A pilot project can also help evaluate the intangible value of your proposed project. For an example of improving consumer relationships through improving environmental issues see Box 11.1 below

To read more about

potential

barriers to implementing

consumer-

side improvement,

see UNEP’s

Greening Shops and

Saving Costs

Guide, pg. 46.


73

Canon has improved consumer relationships by showing them that more energy efficient products save them money!

• Canon initiated a study (see figure 11.2) that shows consumers that they actually save money when Canon produces energy efficient products. As shown in the diagram below, the costs of switching to environmentally friendly products and total environmental protection are lower than the benefits on the consumer side: compare 16.1 to 35.8 Yen.

• Large benefits to the consumer often mean greater benefits for the retailer and producer of the product. They are translated through higher sales, customer loyalty and improved customer relationships by giving them more energy efficient products, and thus saving them money.

• This study helped them to realize the overall benefits of environmental improvements on the consumer side.

Source: Canon sustainability report

Box 11.1: An example of improving consumer relationships through energy efficient products

Implementation

Once you have prioritized your options, you will want to implement your key improvement technique. This stage might include several procedures, such as the following:

• Establish employee and partnership roles and responsibilities;

• Develop a plan for the project, including resources necessary, implementation deliverable deadlines, and

schedules;

• Establish coordination points among processes and people;

• Reach out to various stakeholders in the process;

Each part of the process will be important. For example, if using choice editing of some of your less-sustainable products, it will be important to coordinate with suppliers to find appropriate product substitutions, find a way of informing your customers of your project, and phasing out the product in a suitable manner. Such a project will

require: working with various departments, like purchasing, merchandising, and marketing; ensuring employees

To read more on project

implementation processes, see

UNEP’s

Greening Shops and Saving

Costs Guide,

pages. 19-25

http//:www.unep.fr/pc/retail.

Costs Benefits

Along the Chain: Eco-Efficiency Pays

Figure 11.2: Canon shows that eco-efficiency pays in the consumer side

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are aware of the project and business shift; and coordinating with appropriate suppliers. Schedules will also be

needed, to ensure that all the team members are aware of when certain tasks need to be accomplished.

Measurement of Indicators

When performing any project, it is important to know the success of your project, to judge whether you need to revise your strategies and to be able to report in a concrete manner to your stakeholders (See the following Chapter on Communication). Therefore, indicators will be crucial for understanding if your project is functioning

and performing as intended. Two types of indicators will be especially important:

1) How is the program improving your business value?

2) Is the program having the expected environmental and social impacts?

For example, Marks and Spencer uses customer trust surveys to measure the value and performance improvement options of various CSR programs. For perhaps a more precise measurement, The Ecological Marketing Center in Sweden measures performance of its marketing campaigns in terms of total amount of organic products sold compared to prior the campaign, and number of organic product lines it brought into the store.

You will want to know if what you are doing has an effect on sustainability, which was also a major reason for implementing your project. For example, investigate how much pesticide your company saves by sourcing organic. Or, if you are interested in use issues, you could poll your customers to see if they are heeding your advice.

Measuring your projects will help you understand the success rate of the project, but could also show signs of how your project can be improved. For example, do you need more marketing associated with the project? Could a partner be of use? Finally, measurement will also help you work with future improvement projects.

How to?

The following tables provide practical procedures for evaluating which options you should implement and then following implementation, how to measure the success of your program. These tables are merely guidelines to follow, and can be used as inspiration for your own program.

To read

more in-depth on financial

measure

indicators, see UNEP’s

Greening

Shops and Saving Costs Guide, pg. 23

http://www.unep.fr/pc/retail .

75

Table 11.1: Assessment of Options

Table 11.1 above utilizes a matrix to help you solve the problem of which program to implement. The first step is to choose which side you want to look at, be it sales, use or disposal. Second, review the targeted impact you would like to have through your program, such as decrease in waste, increase in organics sold etc. Third, list potential options for achieving your goals. Fourth, review the issues listed in a comprehensive, holistic approach. You may want to gather a group of employees together and ask them to review the feasibility issues, for example, while the buyer talks to your suppliers to discuss potential barriers, such as a short supply. Finally, based on your

assessment, in the last column, mark the implementation possibility of your options and either choose the most feasible option or take further steps for review.

Table 11.2 provides examples of ways to measure the success of projects. Start with the objective, then think about the target, the target measurement method, and finally, how to follow-up and improve your measurement result. This table will help to guide you, but as every situation is unique, it is important to implement your own studies.

Operational aspect in focus (e.g. sales, use or disposal consumer phase)

Example 1: Sales

Target performance level

Example 1: Increase sales of organics, thus decreasing pesticide use

Operation Analysis - A

Financial Analysis - B Potential for Intangible Value Creation - C

Implementation Potential (good, more work needed, poor)

Option Resources Barriers Discounted Cash Flow Payback

Cost/ Benefit

Customer Relationships

Example 1: Marketing program for organics

Close contact with supplier

and NGO; funding

available

Low employee

knowledge

Positive 5 year

payback on total

marketing project

investment

Costs of marketing

vs. expected

sales

Improved customer trust

through knowledge of

safe and healthy food

More work needed to

assess possibility of

increasing supply

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Table 11.2: Project Measurement Examples

References

Ekologiskt Marknadscentrum. www.ekologisktmarknadscentrum.se

Global Environmental Management Initiative. (GEMI) Forging New Links. 2004

Gunther, Marc. “The Green Machine.” Fortune Magazine. 2006.

Marks and Spencer. Corporate Social Responsibiltiy Report, 2006.

Program Measurement: Possible ways to measure impacts of your project

Objective Target Measurement Tool Follow-Up (dependent upon measure result)

Increase consumer use knowledge

X% people know about proper use of products

• Measure campaign recognition

Example: • Website hits

• Consumer survey

• Change info content on site

• Conduct same research later

Decrease Consumer Electricity Use

X% decrease in consumer home electricity use

Conduct LCA to understand where the life-cycle impacts occur

• Take necessary measures to improve campaign

• Continue campaign and increase products within scope

Increase consumer trust

X% increase in trust in the store

X% increase in consumer store recognition

• Increase in storefront traffic: count number of people in store daily

• Consumer survey

• Reflect information in survey

• Increase targets • Expand project to more

stores

Decrease waste going to landfill or as litter

X% of consumer used materials collected in take-back scheme

• Conduct waste audit following inception of take-back scheme

• Review program credentials

• Think of reuse options for the waste

Decrease amount of pesticides used

Decrease amount of pesticides used by XX litres each year by increasing sales of organics

• Measure amount of pesticides used in normal farming for product

• Review product sales

• Review supplier and goods targeted for farming practices

• Review sales tactics

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Month 12 Communication of your

achievements

Reporting on environmental, social issues in the form of sustainability reporting has become integral to annual reports for many companies in many different sectors. The purpose of reporting on sustainability matters is to create transparency and to provide information to key stakeholders about the sustainability performance of the retail operation, which can have important impacts on financial performance of the organisation and are of interest to customers and business partners, such as financial institutions and suppliers, alike.

Over the past year you have worked to improve sustainability performance within your retail premises, in your supply chain and in your relations with customers. Communicating the progress you have made completes the

management cycle and is vital to fully realising the enhanced value, in all its forms, that you have created for your retail operation.

Some benefits of sustainability reporting for your business are purely financial while others are connected to employee and customer satisfaction. As customers and key stakeholders become aware of your improved performance, your credibility as a business will increase while at the same time the process of examining your retail operation in detail will enable you to discover new business opportunities. Further, retail operations are unique in the business world as they interact with consumers directly and projecting a positive environmentally friendly image can have important spill over effects that encourage consumers to make sustainable purchasing choices. For examples of important benefits for your business, see Box 12.1 below

Benefits of Reporting

Some important benefits that can be achieved through sustainability reporting: • Help identify and address current and potential risks, saving time and money in the short and long term

• As the public becomes more aware of your efforts, customer loyalty and the creditability of your business will be enhanced • Taking a deeper look into your daily business operations through sustainability reporting might reveal new opportunities

• Motivate employees who are committed to work towards attaining your business goals • Reduced cost of compliance with new environmental regulations • A sound understanding of your customers needs and increased customer loyalty to your retail brand Box 12.1: Benefits of Reporting

How to report?

There is no standard method to compile a sustainability report, however, it is good practice to rely on some key principles for guidance to ensure completeness and credibility. A report of questionable quality is likely worse than no report at all as some stakeholders may call your credibility into question. Sound reporting principles you use as guidance in preparing your report could include transparency and inclusiveness of information as overarching principles for all aspects of the report.

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Other principles of importance will include completeness in terms of activities and entities within the scope of your

report, and relevance to the needs of your business and that of your stakeholders. Furthermore, information in your report should be presented in a neutral, comparable manner and should be of sufficient accuracy and reliability to be used for decision-making purposes. The overall purpose of applying these basic principles is to ensure that your sustainability report meets both your needs and those of your stakeholders in an open and clear manner.

Some key steps to follow to draft your report include setting up your team and agreeing on a coordinator, mapping out the needs of the people or organisations affected by your business –your stakeholders, deciding on the indicators to report and the means of communication to meet the needs of the different stakeholders that matter to your retail operation.

Set Up the Reporting Team

Your first step should be to arrange your team and develop a timeline for completing the reporting process. Team members can be drawn from the staff you have worked with over the past year to implement sustainability initiatives in your ‘in house’, supply chain and customer relations activities. The team members that participated in

these processes will have access to the required information (e.g. emissions, waste or energy consumption) and knowledge to compile your report. As with other phases of this process, the team should agree on a coordinator who will have overall responsibility for the report and document the results in the form of a final report.

Draw Your Stakeholder Value Map

You need to understand who it is you are trying to reach in your communications efforts and what their interests

are. Your stakeholders are people or organisations that influence or are affected by your business. They can include external parties such as customers, suppliers, regulatory officials and financial institutions. A stakeholder group that is often overlooked is internal stakeholders such as employees, management and owners of the business, who are in positions to take positive actions that enhance the sustainability of your retail operation.

Knowing who your stakeholders are and what aspects of your retail operation are of interest to them will provide important guidance on what you report and the means by which you communicate. The following table will assist you in identifying what information is of interest to different stakeholders. List your stakeholders in the following table and rank their likely interest in in-store issues, supply chain issues and customer relations.

What issues interest your stakeholders?

Likely area of interest Rank 1 (low interest) to 5 (high interest)

Stakeholder group In-Shop

Supply Chain Customer

Relations

Internal stakeholders

79

External stakeholders

Table 12.1: Issues of interest to stakeholders

To further focus your reporting efforts you may wish to analyse the importance of each stakeholder group with respect to their influence on key priorities for your operation. Your key priorities might include community reputation, access to capital, staff motivation, new market opportunities or access to information. You will need to determine the priorities of your retail operation based on your unique circumstances.

Rank the influence of each stakeholder on your key business priorities. The sum of your rankings will provide you an indication of the relative importance of each stakeholder group to your organisation and can assist you with prioritising reporting and communication efforts.

What influence do different stakeholders hold over my business?

Stakeholder Key Priority 1

Key priority 2

Key Priority 3 Key priority 4 Sum of rankings

Stakeholder 1

…

Stakeholder 2

…

Stakeholder 3

…

Stakeholder 4

…

Table 12.2: Stakeholder influence over businesses

Finally, once you have an understanding of who your key stakeholders are and what issues are of interest to them, it will be important to set your reporting scope and boundaries. This includes setting the reporting period, how frequently you want to report, and which divisions, subsidiaries, products and facilities should be included in the report.

Compile Your Data and Select Your Communication Methods

Based on your understanding of your key stakeholders and their interests, you will need to compile the information gathered in the previous phases of this guideline. Use the stakeholder map above as guidance to identify the most important and relevant performance indicators for each stakeholder group.

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You may wish to communicate your achievements differently to various stakeholders groups. For instance,

customers may be more effectively reached through supplements to conventional advertising or in-store information while a more formal report might be more appropriate for suppliers or financial institutions.

The following table can help you decide which communication medium might be the most suitable for your needs. Across the top row you list your most important stakeholders and in the left column list the methods you are considering. Check off which stakeholders you can reach using each method.

How can your stakeholders be reached most effectively?

In-Store Issues Supply Chain Issues Customer Relations Issues

Means to report Stakeholder Stakeholder Stakeholder Stakeholder Stakeholder Stakeholder

Formal sustainability report

Newsletter

Press release

Conference

Meetings

Conventional advertising supplement

Other(s) Table 12.3: Reaching stakeholders efficiently

Get Recognition for Your Efforts

Getting external recognition for your efforts can be an important part of communicating your green credentials to your stakeholders. Many non-government and government organisations acknowledge outstanding performance with awards of various kinds. Seek out different award schemes that are appropriate for your organisation and

apply for them. Receiving a sustainability award can add considerable exposure to your retail operation and will enhance the profile of your sustainability program among top management.

Achieve Continuous Improvement

Striving for continuous improvement is clearly an important goal, however to fully realise the value of your efforts

you should also strive to continuously improve the means by which you communicate your achievements. The final step in this section of the Retail Guidelines is to collect feedback from your internal and external stakeholders on how to better meet their information needs in terms of structure, content and scope of your communication efforts.

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Publishing Details

Authors & Editors


Burcu Tunçer, Greg Tyson, Wendy Wallace, Tomasz Muchorowski, Daria Karetnikov & Patrick Schroeder

Project Management


Burcu Tunçer, Michael Kuhndt

United Nations Environment Programme, Division of Technology, Industry & Economics, Sustainable Consumption & Production Branch

Solange Montillaud-Joyel

Layout

Martin Herrndorf

August 2007

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