By Steve Rowen, Managing Partner
January 26, 2010
I recently had the opportunity to interview Scott Boutwell, an independent sustainability consultant and former executive at such companies as Oracle, CH2M Hill, and URS Corporation. Scott’s focus is on new business processes and enabling technology solutions in the emerging space of environmental sustainability. He has published in several leading periodicals including Greenbiz, GreenerBuildings, and TriplePundit, and his blog is widely quoted.
RSR: Imagine you are a retailer today. With so much noise about “green” opportunities flooding the airwaves, where do you start?
Boutwell: I would start with gaining complete visibility of my carbon footprint. This is especially true for larger retailers – those who manage multiple distribution channels, have a global presence, and have large and complex supply. I would venture that most retailers have decent insight into carbon emissions in their stores and distribution centers in US and maybe North America, but much less visibility in facilities in other parts of the world, and probably very little visibility into carbon impacts in their supplier networks.
Given that much of the green house gas (GHG) emissions and energy consumption is from stores and distribution centers, strategies to gather & manage additional data (from building management systems, sub –meters, other IT systems) and to integrate this energy consumption information into a corporate asset management plan, could yield significant value towards developing a complete carbon footprint.
Why is visibility so important? First, you need a complete & accurate picture of current operations to understand your risks (and opportunities); consider this a ‘diagnostic’ process. It also allows you to benchmark against competitors in your sector as well as compare to other industries; to better plan your climate action or sustainability strategies. And finally, complete visibility allows you to set aggressive yet realistic goals for energy and carbon reduction, based on levels identified today.
RSR: Any forward-thinking examples you can think of in retail?
Scott Boutwell: Staples and obviously, Wal-Mart, come to mind. Much of what they are doing is in the public domain. The key driver for both of these companies is customer demand and satisfaction. Many companies, including some in the retail space, are content to wait for regulation enactment (or wait for a market with a set price for carbon to emerge) before embarking on any sustainability program.
Staples and Wal-Mart view sustainability awareness and GHG management as ways to gain marketshare from competitors, as well as introduce new labels that may generate higher profitability. There is genuine opportunity not only to communicate ‘green’ brands and success in sustainability; there is the opportunity to actively engage with customers on green issues and to educate them. This ‘education’ may entail how to use products safely, and how to recycle them easily. It can also provide a framework for feedback; driving product enhancements, new green product design, while gaining valuable input for continual improvement programs as well.
How do other retailers emulate this approach? Develop and fund an active engagement program. Leverage, promote, & allow access to internal staff who are champions of sustainability within your company. Integrate your education and engagement program with stakeholder involvement (CSR) efforts. And: remember that you will still need complete visibility into your own (and key supplier) ‘footprint’, as well as be able to articulate your specific successes in GHG and energy reduction. You can’t say any of this without knowing – it all comes back to visibility. Once that is established, the next step is to build a framework or strategy to reduce GHG emissions and energy consumption; initiatives can include: retrofitting facilities, incorporating LEED design for new facilities, upgrading & integrating energy management systems, and leveraging renewable power sources, among others. Once this strategy is commenced, communicate it effectively, whether in an annual report or a report provided to an NGO. Finally, there becomes the opportunity for effective communications to stakeholders – including employees and suppliers.
RSR: What are the roadblocks that you see preventing more forward progress?
Boutwell: I think the two biggest roadblocks are driving change throughout the enterprise, and defining an ROI that is defensible for the investments that will need to be made. Believe it or not, I think retailers may have an advantage over other industries. First: in other industries, especially ones that are heavily regulated, the mindset on sustainability is compliance – driven: change will not occur until such time that an organization is forced to do so. The retail industry has an advantage in that this mindset is not part of the corporate culture, and it allows executives to focus on market share, profitability, and customer loyalty; and less on traditional ‘cost control’ or risk management initiatives.
What makes retail different is the customer-facing aspect. There is such a wave of customer demand right now, that it’s actually a little easier for retail companies to attain the proper executive sponsorship required. This is so built in to the success of the retail community that it is not an add-on initiative – as it is elsewhere. There are certain segments of retail where this is even more pronounced – green sourcing may be more of an issue in office supplies than it is in apparel, for example – but customer involvement still plays a role in how fast retailers mush move.
But to achieve, communicate, and engage on sustainability goals, there are inherent investments to be made: organizational change, business process review & engineering, best practice development, and the required enabling technology system(s). Also, given that retail relies so heavily on the value chain (suppliers, distributors, consumers in their ultimate use/disposal/recycling or return or products) and can be visibly ‘tied’ to the actions of it’s key suppliers, it is important to understand all the associative impacts throughout the value chain. And that is a fair amount of work.
RSR: Is there a quick and easy hit that retailers can perform to ‘have a green story’ to tell customers, reduce costs, etc?
Boutwell: One of the challenges in sustainability (and carbon management in particular); it’s not a ‘bolt-on’ process. You can’t keep operating the way you already operate and just bolt something on the side and get incremental value. In essence, sustainability asks that retailers critically review the way they do business, and how those processes need to change. It causes a new way of thinking, and most economists agree that the world economy is going to change dramatically as the economy starts to come back.
Today, there are basic ‘tablestakes’ for global corporations, such as reporting on GHG emissions, according to state, regional, or NGO guidelines. Complete visibility and reporting itself may provide a quick “ROI” by allowing the communication & marketing of potentially favorable results; such as lower emissions relative to competitors or benchmarks for your industry. But I would not rely solely on visibility and reporting of current GHG emissions as your ROI; it is merely a starting point. Customers and the public will demand continuous improvement, with aggressive goals, and defensible reporting. It’s important to note that brand management is such a critical component of retail. You don’t see that with other industries where the products are commodities (gasoline, for example). But especially in apparel, brand is everything. There’s a real opportunity to differentiate yourself on your practices here
RSR: Any other trends worth mentioning?
Boutwell: It seems with a number of retailers like Target and Staples as examples, there’s a strong trend toward developing and selling more private label goods. The benefits are higher margin, better quality control, etc. Accordingly these retailers aren’t just a brand, any longer, now they’re also manufacturers. Sustainability becomes much more complex – more materials, more processes, more emissions – this means you’ve more reason to establish visibility and set aggressive goals to lower your footprint.
Another immediate trend is the need to better understand the impacts associated with your supply chain. As many in the retail industry know, the actions of suppliers can directly affect your brand, so it is important to communicate effectively with key suppliers regarding sustainability metrics and programs. Evaluating supply chain impacts itself is very complex, given the number of suppliers, various products and services that they provide, the range of metrics and processes deployed to manage sustainability programs, and the ability to effectively communicate with the retail company. But there are key areas that a retail company can focus on with suppliers: optimizing logistics, so that transportation impacts (fuel use) can be minimized; and optimizing solid waste management – including packaging materials. Goals & processes to limit the amount of materials used, and increase the level of recycled materials used is critical; remembering that these packaging materials are going to end up in landfills and that there is tremendous opportunity to reduce that cost to customers, suppliers, and the retail company itself.
Another longer–term trend is the development of life cycle assessments (LCA) for new product design. Extracting raw materials out of the earth and processing them, assembling them, storing & distributing, deliveries & returns, product use, recycling and ultimate disposal – the value chain is complex enough for a product with limited number of materials such as that for a pencil, but once you start looking at a complex product (such as a car, DVD player, computer, etc) the evaluation of impacts can be very difficult. But we are already seeing in some industries such as the tire and car industry that LCA assessments not only provide a complete picture of total impacts to the environment (i.e. GHG, water, solid waste, toxics), but they also can be used for scenario planning, such as material substitution analyses to evaluate various product designs for ‘green’ promotion.
Editor’s Note: To contact Scott directly, readers may reach out to him at scott@c-level.biz.
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