March 13, 2007
Wal-Mart Grades Suppliers on Packaging Math
Wal-Mart has released the initial results of its Packaging Scorecard, a program developed to gauge the progress vendors are making in reducing packaging waste and assisting in the protection of natural resources and the environment.
The Scorecard program, first launched last September at the Clinton Global Initiative, is part of Wal-Mart’s initiative to reduce vendor packaging by five percent by 2013. The Scorecard’s online database allows vendors to calculate the impact of how a number of packaging related factors impact the environment.
"Wal-Mart has made a commitment to reducing waste in packaging in order to sustain our resources and environment and to reduce total system costs," said Matt Kistler, senior vice president of marketing, research, and insights for Sam’s Club and captain of Wal-Mart’s Packaging Sustainability Network, in a press release. "We are in a unique position to drive positive change in the area of sustainability by working with our suppliers. The packaging scorecard helps everyone make better decisions that are good for business, our customers and the environment."
Wal-Mart has said that in its first month, 2,268 vendors went online to the Scorecard site. A total of 117 items have been entered into the system. The retailer is looking for these numbers to increase significantly over the next year.
"We have already used the scorecard to evaluate two types of packaging," said Josh Hannay, business development manager from Ruiz Food Products. "The scorecard was easy to use and gave us a single number that translates into how we’re doing and how we can do better. Our company is looking forward to reducing waste while saving money."
"It’s important to show that being an efficient and profitable business goes hand-in-hand with being a good steward of the environment," said Mr. Kistler.
Discussion Questions: Has going green finally passed beyond what was once cynically viewed as a public relations ploy to a business imperative (making or saving dollars) for companies? To what extent do you agree or disagree with the following statement as it pertains to retailers: "Being an efficient and profitable business goes hand-in-hand with being a good steward of the environment."
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Very large retail companies–like Wal-Mart, Tesco, Kroger, Carrefours–share a special imperative with regard to environmental impact, due to their operational scale. When you’re that large, a single “green” decision, like discouraging double packaging, rolls up to a significant cumulative impact.
A single change in policy at Wal-Mart can alter practices at multiple suppliers and with them the underlying scale economies of green corporate behavior. The cascade of effects could be quite profound and far-reaching, as the packaging scorecard initiative suggests.
Wal-Mart’s economic footprint is now large enough for it to be a market maker for environmentally sound and socially responsible solutions of all stripes–packaging is just low-hanging fruit. What an epic opportunity for its leaders! Do they possess the vision and the will?
Great topic. We have been working in the Sustainability “Green” arena for the past three years. It certainly started off as a “look good” kind of PR program for a few, but that soon changed when companies like Wal-Mart and European Chains recognized that it was also good business.
The popular term “Triple Bottom Line” or TBL is a great descriptor where you have positives for economics and environment and are socially responsible as well! There is even a Dow Jones Sustainability Index that routinely tracks above the S&P Index.
So going green is more than profitable because you can reduce and change products, processes, packages and technologies to deliver better results at lower costs and reduced ecological burdens like green house gases (GHG), water pollution and more. You need to take a bigger picture look and think more systems and holistically through your processes, i.e Mighty All is a concentrated detergent where less water is used in the product, thereby reducing materials, transportation burdens, plastic needed for manufacture (reduced fossil fuel use) and more. It just makes good sense and is TBL thinking.
And yes, there needs to be retail support and consumer education but we are on the sustainability track and we can thank Wal-Mart for pushing. This “Green Thing” is not a consumer pull–it is a retail push. And regardless how it started, it is going to make companies more profitable and efficient and we will see improved social responsibility and environmental positives, too. How do I know? Because we are now living in a transparent society where everything we say and do is available over the internet; available for special interest groups to take action immediately! So Go Green and look at your systems and businesses more holistically and you will stand and deliver a new level of innovation, profit and goodness to your organization!
It’s fantastic to see Wal-Mart behind initiatives like this, whatever the motivation. The organic, natural, and niche retailers are simply not large enough to kick-start packaging reductions like Wal-Mart can.
The goal of a 5% reduction by 2013 seems low to me, though. There is still plenty of low-hanging fruit to pick. As just one example, one of the clubs still sells 32 packs of canned diet soda divided into eight packs of soda held together with plastic holders, AND the entire 32 pack is shrink wrapped AND in a cardboard tray. So, the product is triple packed, where before it was just in a simple cardboard tray. Got to be a whole lot better for the environment that way.
Recycling of packaging has been going on for decades–mostly as a cost savings or revenue capturing movement. The added emphasis on what is good for the environment is a bonus to what should be effective, efficient business practices. As far as public relations or perception it is also good business to publicize your initiatives because more and more consumers care about and support green companies.
As usual, fear is providing motivation that is working for consumers and retailers alike. Whatever that motivation, though, it is working and any retailer who doesn’t realise it will suffer as time goes on. Consumers are far more determined to support the companies they feel meet their concerns for themselves and, in many cases more importantly, for their children. Very few parents anywhere any time take kindly to threats to their children. Going green is way past PR, it is now do or die.
Wal-Mart is putting its money where its mouth is. The retailer has made great strides in becoming greener. In operations and in the actual structure of its boxes, the company is making a serious effort to become more environmentally friendly. This latest decision is a consistent continuation of that policy. American readers might also be interested to read that Dr. David Suzuki, Canada’s most prominent spokesman on environmental issues, was the star speaker at a recent Wal-Mart gathering of company executives and suppliers.
Yes, it may make companies more profitable and/or efficient, but it also still goes a long way on the PR front. There are several reasons why consumers and marketers don’t like Wal-Mart, but this certainly equates to points in W-M’s favor. Huge help for companies that do not have the resources to do this alone. Meanwhile, my local Wal-Mart has discontinued accepting plastic shopping bags (post-consumer) for recycling, and as I understand it, many Wal-Mart stores in my region have done the same.
I think that ‘Lean’ is going to be a hot topic going forward. No matter what one’s political persuasion, the reduction of waste in all its forms is the ‘Right thing to do.’ I expect we are going to see more of this, because we are being forced to by the environmental condition which is escalating beyond control. This week, a significant environmental white paper is going to be released which states some pretty harsh predictions, particularly about the lack of fresh water which will occur as early as 2050. Retailers probably have the greatest impact on the public, after politicians, and they can make a major change in the habits of suppliers, and customers to the benefit of the entire human race.
Al is right, anything in this direction is good regardless of the motivation. The industry needs to be sensible and start to practice what they preach though. I attended the Organics Expo in California this past weekend and it was unbelievable how huge the organics industry is getting. It was really wonderful to see all the green companies doing their part. It was truly eye-opening. What was also eye-opening was the amount of garbage that these same companies were generating. Plastic cups to sample all the teas, plastic bottles, glass bottles, cardboard containers for food and snack samples, etc, etc. You would think that as an industry, more attention could be paid to how products are sampled at trade shows to reduce the amount of non-recycled packaging that is generated. Being green is a must and the Organics industry should be a role model in this regard.
Less packaging also typically means less shelf space required, resulting in higher turns on the shelf and more productive shelf space. When Tide moved to an Ultra product, and the packaging was reduced by 30%, the efficiency of the category, the reduced out of stocks, and the increase in turns was significant. Imagine what this could do for a total store!
Another industry that needs to get on board with this concept is the toy industry. The amount of packaging within one toy is truly incredible–excess plastic and cardboard from one toy can fill a small garbage bag. (It also takes forever to actually get the toy out of the packaging!)
As consumers, we all have to continue to recycle everything that we can. Cardboard is such a valuable material, but I continue to see neighbors on my block throwing it out instead of sending it to a recycling bin.
I was talking to a vendor a couple weeks ago who said the most effective way to attain sustainability goals is not via legislation, but “via the order pad” based on specifications required by the buyer. If more companies like Wal-Mart take the initiative in this manner, it’ll save us from lame-brained government requirements down the line–which is better for both the industry and the environment.
Wal-Mart and many other key retailers in the US, understand the significance of environmentally friendly products. Consumers are increasingly aware of global warming and the impact on the future so their dollars will follow products and retailers that focus on efforts to eliminate waste and improve on efforts to help clean up the environment.
Wal-Mart, as part of the European sustainability consortium of retailers and suppliers across Europe, will aggressively migrate those sustainability plans to the USA. It’s the right thing to do for our environment and for future generations. This effort needs to be broadly supported by all US retailers and suppliers to have the type of impact being made in Europe. Packaging reductions are only one part of the total Sustainability initiatives but an important one. Hopefully we’ll see a total best practices release of information soon, so taking steps now will postively impact our future.
(Disclosure: RAM Communications is the public relations consultant to CHEP, which provides pallet and container pooling solutions)
There is a direct correlation between the increase in oil prices, landfill tipping fees and related costs during the last 15 to 20 years and the commercial logic of “going green.” When doing the right thing for the environment is also doing the right thing for the bottom line, only a lapse in an executive’s fiduciary duty would explain a company’s failure to implement a sustainable resource strategy.
In Europe, where product stewardship laws require manufacturers to recover any master packaging sent down the supply chain, practices are set in place to transport product in reusable trays and other containers. Originally seen as a cost, suppliers and retailers have worked together to reach a consistent return on the investment.
Sustainability and green are great words right now, but let’s not forget that there are sound, tangible business reasons for Wal-Mart to drive this, just like practically everything else they do. “Reduced packaging” is often equivalent to reduced footprint on the shelf. And that drives down the space required to merchandise a sku, brand and entire category. Some estimates of the current push to concentrated detergents and laundry softeners puts the space reduction at a third or better. That’s great for the economics of the stores.
But there is a quid pro quo. Much of the increase in packaging is due to (perceived) consumer benefits–typically convenience. Even more is driven by manufacturers trying to drive up the “face” of the brand to the consumer. With all the discussion around how important effective in-store communication is today, and with the package being the most important element of that, what will marketers be giving up to “go green”?
While many of the above comments listed above cite economic benefits for moving to sustainable packaging, there may also be tangible consumer benefits as well for some items. An example is the concentrated laundry detergents–“All-Mighty” and “Tide.” While the smaller package also results in fewer stockouts, keeping the consumer happy since their favorite detergent is available, it is MUCH easier to carry and use a 33 fl. oz container than a 100 fl. oz container. A systems approach of looking at ways to not only save packaging, but also make the entire package more convenient for the consumer can also be extremely beneficial.
Supply Chain Digest called the “Green Supply Chain” movement our number 1 trend of 2006. (see previous discussing in RetailWire on Jan 10, 2007).
There is, I think, a number of things going on here. (1) Wal-Mart understandably wants some positive PR elements to combat the relentless assaults it faces from unionizers and others; (2) it seems CEO Lee Scott really does have a lot of “green” blood in him; (3) packaging clearly is an area where there is a ton of room for improvement. Companies just never really bothered to look.
The reason green initiatives will last is because there are plenty of places, given higher energy costs especially, where going green intersects with lower costs. Thus, while companies have to devote some resources there that could go elsewhere, those efforts will results in improved costs.
So, there may be a few efforts that don’t drive bottom line improvements just for the good press, but there are so many opportunities to do both (do the “green” thing and save money) that it will be deeply embedded in many companies, and already is in many (Wal-Mart, Staples, GE, Matushita/Panasonic, etc.)
Is the 5% packaging reduction goal a comp figure or not? If it’s a comp figure, less than 1% annually doesn’t seem very ambitious. If the Wal-Mart figure includes noncomp growth, then it’s very ambitious. Either way, it’s better to have good-guy pr than otherwise.
Wal-Mart’s packaging reduction efforts go far beyond the simple reduction of product packaging; the score carding that has been developed follows the packaging process back to source materials, production and transportation and measures efficiency and environmentally sound production and component usage. All of these components are utilized in deriving a “score” for suppliers to use as a baseline for improvement.
In addition to the Packaging Sustainability Network, Wal-Mart has organized over a dozen others which are comprised of GOs, NGOs, Suppliers and Wal-Mart executive sponsors. The packaging initiative has legs, great big legs. This is a push not a pull and all industries will be affected by it whether they want to participate or not. Once a baseline is established it becomes a point of measurement, the metrics now exist to quantify and the supply chain will all feel the push to improve.
It is an initiative that could never be “legislated” and could only come from the private sector, Wal-Mart is only one of the industry leaders who have the ability to jump start the industry to action; let’s see if others join in.
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Very large retail companies–like Wal-Mart, Tesco, Kroger, Carrefours–share a special imperative with regard to environmental impact, due to their operational scale. When you’re that large, a single “green” decision, like discouraging double packaging, rolls up to a significant cumulative impact.
A single change in policy at Wal-Mart can alter practices at multiple suppliers and with them the underlying scale economies of green corporate behavior. The cascade of effects could be quite profound and far-reaching, as the packaging scorecard initiative suggests.
Wal-Mart’s economic footprint is now large enough for it to be a market maker for environmentally sound and socially responsible solutions of all stripes–packaging is just low-hanging fruit. What an epic opportunity for its leaders! Do they possess the vision and the will?
Great topic. We have been working in the Sustainability “Green” arena for the past three years. It certainly started off as a “look good” kind of PR program for a few, but that soon changed when companies like Wal-Mart and European Chains recognized that it was also good business.
The popular term “Triple Bottom Line” or TBL is a great descriptor where you have positives for economics and environment and are socially responsible as well! There is even a Dow Jones Sustainability Index that routinely tracks above the S&P Index.
So going green is more than profitable because you can reduce and change products, processes, packages and technologies to deliver better results at lower costs and reduced ecological burdens like green house gases (GHG), water pollution and more. You need to take a bigger picture look and think more systems and holistically through your processes, i.e Mighty All is a concentrated detergent where less water is used in the product, thereby reducing materials, transportation burdens, plastic needed for manufacture (reduced fossil fuel use) and more. It just makes good sense and is TBL thinking.
And yes, there needs to be retail support and consumer education but we are on the sustainability track and we can thank Wal-Mart for pushing. This “Green Thing” is not a consumer pull–it is a retail push. And regardless how it started, it is going to make companies more profitable and efficient and we will see improved social responsibility and environmental positives, too. How do I know? Because we are now living in a transparent society where everything we say and do is available over the internet; available for special interest groups to take action immediately! So Go Green and look at your systems and businesses more holistically and you will stand and deliver a new level of innovation, profit and goodness to your organization!
It’s fantastic to see Wal-Mart behind initiatives like this, whatever the motivation. The organic, natural, and niche retailers are simply not large enough to kick-start packaging reductions like Wal-Mart can.
The goal of a 5% reduction by 2013 seems low to me, though. There is still plenty of low-hanging fruit to pick. As just one example, one of the clubs still sells 32 packs of canned diet soda divided into eight packs of soda held together with plastic holders, AND the entire 32 pack is shrink wrapped AND in a cardboard tray. So, the product is triple packed, where before it was just in a simple cardboard tray. Got to be a whole lot better for the environment that way.
Recycling of packaging has been going on for decades–mostly as a cost savings or revenue capturing movement. The added emphasis on what is good for the environment is a bonus to what should be effective, efficient business practices. As far as public relations or perception it is also good business to publicize your initiatives because more and more consumers care about and support green companies.
As usual, fear is providing motivation that is working for consumers and retailers alike. Whatever that motivation, though, it is working and any retailer who doesn’t realise it will suffer as time goes on. Consumers are far more determined to support the companies they feel meet their concerns for themselves and, in many cases more importantly, for their children. Very few parents anywhere any time take kindly to threats to their children. Going green is way past PR, it is now do or die.
Wal-Mart is putting its money where its mouth is. The retailer has made great strides in becoming greener. In operations and in the actual structure of its boxes, the company is making a serious effort to become more environmentally friendly. This latest decision is a consistent continuation of that policy. American readers might also be interested to read that Dr. David Suzuki, Canada’s most prominent spokesman on environmental issues, was the star speaker at a recent Wal-Mart gathering of company executives and suppliers.
Yes, it may make companies more profitable and/or efficient, but it also still goes a long way on the PR front. There are several reasons why consumers and marketers don’t like Wal-Mart, but this certainly equates to points in W-M’s favor. Huge help for companies that do not have the resources to do this alone. Meanwhile, my local Wal-Mart has discontinued accepting plastic shopping bags (post-consumer) for recycling, and as I understand it, many Wal-Mart stores in my region have done the same.
I think that ‘Lean’ is going to be a hot topic going forward. No matter what one’s political persuasion, the reduction of waste in all its forms is the ‘Right thing to do.’ I expect we are going to see more of this, because we are being forced to by the environmental condition which is escalating beyond control. This week, a significant environmental white paper is going to be released which states some pretty harsh predictions, particularly about the lack of fresh water which will occur as early as 2050. Retailers probably have the greatest impact on the public, after politicians, and they can make a major change in the habits of suppliers, and customers to the benefit of the entire human race.
Al is right, anything in this direction is good regardless of the motivation. The industry needs to be sensible and start to practice what they preach though. I attended the Organics Expo in California this past weekend and it was unbelievable how huge the organics industry is getting. It was really wonderful to see all the green companies doing their part. It was truly eye-opening. What was also eye-opening was the amount of garbage that these same companies were generating. Plastic cups to sample all the teas, plastic bottles, glass bottles, cardboard containers for food and snack samples, etc, etc. You would think that as an industry, more attention could be paid to how products are sampled at trade shows to reduce the amount of non-recycled packaging that is generated. Being green is a must and the Organics industry should be a role model in this regard.
Less packaging also typically means less shelf space required, resulting in higher turns on the shelf and more productive shelf space. When Tide moved to an Ultra product, and the packaging was reduced by 30%, the efficiency of the category, the reduced out of stocks, and the increase in turns was significant. Imagine what this could do for a total store!
Another industry that needs to get on board with this concept is the toy industry. The amount of packaging within one toy is truly incredible–excess plastic and cardboard from one toy can fill a small garbage bag. (It also takes forever to actually get the toy out of the packaging!)
As consumers, we all have to continue to recycle everything that we can. Cardboard is such a valuable material, but I continue to see neighbors on my block throwing it out instead of sending it to a recycling bin.
I was talking to a vendor a couple weeks ago who said the most effective way to attain sustainability goals is not via legislation, but “via the order pad” based on specifications required by the buyer. If more companies like Wal-Mart take the initiative in this manner, it’ll save us from lame-brained government requirements down the line–which is better for both the industry and the environment.
Wal-Mart and many other key retailers in the US, understand the significance of environmentally friendly products. Consumers are increasingly aware of global warming and the impact on the future so their dollars will follow products and retailers that focus on efforts to eliminate waste and improve on efforts to help clean up the environment.
Wal-Mart, as part of the European sustainability consortium of retailers and suppliers across Europe, will aggressively migrate those sustainability plans to the USA. It’s the right thing to do for our environment and for future generations. This effort needs to be broadly supported by all US retailers and suppliers to have the type of impact being made in Europe. Packaging reductions are only one part of the total Sustainability initiatives but an important one. Hopefully we’ll see a total best practices release of information soon, so taking steps now will postively impact our future.
(Disclosure: RAM Communications is the public relations consultant to CHEP, which provides pallet and container pooling solutions)
There is a direct correlation between the increase in oil prices, landfill tipping fees and related costs during the last 15 to 20 years and the commercial logic of “going green.” When doing the right thing for the environment is also doing the right thing for the bottom line, only a lapse in an executive’s fiduciary duty would explain a company’s failure to implement a sustainable resource strategy.
In Europe, where product stewardship laws require manufacturers to recover any master packaging sent down the supply chain, practices are set in place to transport product in reusable trays and other containers. Originally seen as a cost, suppliers and retailers have worked together to reach a consistent return on the investment.
Sustainability and green are great words right now, but let’s not forget that there are sound, tangible business reasons for Wal-Mart to drive this, just like practically everything else they do. “Reduced packaging” is often equivalent to reduced footprint on the shelf. And that drives down the space required to merchandise a sku, brand and entire category. Some estimates of the current push to concentrated detergents and laundry softeners puts the space reduction at a third or better. That’s great for the economics of the stores.
But there is a quid pro quo. Much of the increase in packaging is due to (perceived) consumer benefits–typically convenience. Even more is driven by manufacturers trying to drive up the “face” of the brand to the consumer. With all the discussion around how important effective in-store communication is today, and with the package being the most important element of that, what will marketers be giving up to “go green”?
While many of the above comments listed above cite economic benefits for moving to sustainable packaging, there may also be tangible consumer benefits as well for some items. An example is the concentrated laundry detergents–“All-Mighty” and “Tide.” While the smaller package also results in fewer stockouts, keeping the consumer happy since their favorite detergent is available, it is MUCH easier to carry and use a 33 fl. oz container than a 100 fl. oz container. A systems approach of looking at ways to not only save packaging, but also make the entire package more convenient for the consumer can also be extremely beneficial.
Supply Chain Digest called the “Green Supply Chain” movement our number 1 trend of 2006. (see previous discussing in RetailWire on Jan 10, 2007).
There is, I think, a number of things going on here. (1) Wal-Mart understandably wants some positive PR elements to combat the relentless assaults it faces from unionizers and others; (2) it seems CEO Lee Scott really does have a lot of “green” blood in him; (3) packaging clearly is an area where there is a ton of room for improvement. Companies just never really bothered to look.
The reason green initiatives will last is because there are plenty of places, given higher energy costs especially, where going green intersects with lower costs. Thus, while companies have to devote some resources there that could go elsewhere, those efforts will results in improved costs.
So, there may be a few efforts that don’t drive bottom line improvements just for the good press, but there are so many opportunities to do both (do the “green” thing and save money) that it will be deeply embedded in many companies, and already is in many (Wal-Mart, Staples, GE, Matushita/Panasonic, etc.)
Is the 5% packaging reduction goal a comp figure or not? If it’s a comp figure, less than 1% annually doesn’t seem very ambitious. If the Wal-Mart figure includes noncomp growth, then it’s very ambitious. Either way, it’s better to have good-guy pr than otherwise.
Wal-Mart’s packaging reduction efforts go far beyond the simple reduction of product packaging; the score carding that has been developed follows the packaging process back to source materials, production and transportation and measures efficiency and environmentally sound production and component usage. All of these components are utilized in deriving a “score” for suppliers to use as a baseline for improvement.
In addition to the Packaging Sustainability Network, Wal-Mart has organized over a dozen others which are comprised of GOs, NGOs, Suppliers and Wal-Mart executive sponsors. The packaging initiative has legs, great big legs. This is a push not a pull and all industries will be affected by it whether they want to participate or not. Once a baseline is established it becomes a point of measurement, the metrics now exist to quantify and the supply chain will all feel the push to improve.
It is an initiative that could never be “legislated” and could only come from the private sector, Wal-Mart is only one of the industry leaders who have the ability to jump start the industry to action; let’s see if others join in.