Delivering the Triple Bottom Line
Retailers and suppliers working together to conceive of and execute even the most elaborate integrated marketing and merchandising programs is a piece of cake compared to many of the sustainability related challenges trading partners are attempting to solve. Those solutions require companies to look further upstream in their supply chains to understand the impact of crop growing practices, identify opportunities to reduce food waste and even rethink efforts to promote product consumption.
For many years now, retailers and suppliers have understood that many sustainability efforts are good business practices. Recycling plastic and corrugated materials saves companies money and means less material in landfills or floating in the ocean. Increasing usage of alternative energy sources like solar and wind can also help companies save money, but more importantly, reduce greenhouse gas emissions. These efforts are part of the pursuit of the so-called triple bottom line philosophy that blends environmental and societal impacts with traditional bottom-line profit.
A farming show in Iowa included information about the importance of reducing fertilizer runoff that winds up in the Gulf of Mexico, suffocating marine life.
It's why earlier this year, a major farming show held in Boone, Iowa was the venue for collaboration among a diverse cast of characters who took the concept of looking upstream in their supply chain quite literally. An organization called the Midwest Row Crop Collaborative, or MRCC, is out to change growing practices that are causing harm to the waters of the Gulf of Mexico. The founding members of the MRCC—Cargill, the Environmental Defense Fund, General Mills, Kellogg Co., Monsanto, PepsiCo, The Nature Conservancy, Walmart and the World Wildlife Fund—gathered at the Farm Progress show to launch a broad-based effort to support, enhance, and accelerate the use of environmentally preferable agricultural practices in Illinois, Iowa, and Nebraska.
DEALING WITH THE 'DEAD ZONE'
The technical name "gulf hypoxia" is used to describe an area where warm, nutrient-rich waters from the Mississippi River flow into the Gulf of Mexico. High concentrations of nutrients such as nitrogen and phosphorous reduce the concentration of dissolved oxygen in the water and promote algae growth. When algae die, oxygen is consumed in the process, which further contributes to the "hypoxia" phenomenon and results in an area a little bigger than Connecticut referred to as the "Dead Zone," because it can't support marine line. The size of the Dead Zone varies from year to year, depending on rainfall throughout the Midwest and the volume of fertilizer farmers apply to boost crop yields.
Because row crops such as corn and soybeans are prevalent in Illinois, Iowa and Nebraska, the MRCC plans to raise more than $4 million over four years to help accelerate a soil health initiative undertaken by the National Corn Growers Association. The grower group expects to enroll 100 farms for field-scale testing and measuring management practices that improve soil health, such as growing cover crops, using alternative soil-tilling techniques and using science-based nutrient management techniques. The plan is to quantify the economic benefits of these practices.
"This collaboration between environmental organizations and some of the world's largest agriculture-based companies should lead to significantly ramped-up water conservation in the Midwest," according to Mark Tercek, president and CEO of The Nature Conservancy. "TNC is eager to use our science and expertise to accelerate solutions that match the scale of the challenges we face in that region, such as improving water quality across the Midwest and addressing the dead zone in the Gulf of Mexico."
No retailer wants to be associated with something called the "Dead Zone," so Walmart is involved in the MRCC to be part of the solution and ensure products it sells are grown in a manner that doesn't exacerbate a well-documented environmental problem. Doing so fits with the company's next-generation sustainability agenda, designed to create what president and CEO Doug McMillon called a new era of trust and transparency. Involvement in the MRCC is just one example of the type of upstream efforts under way at Walmart and other retailers that aren't readily visible to consumers but tend to have a cumulative effect on a company's reputation.
"The data shows us that for the first time ever we are seeing responsibility as being core to our brand," says Brittni Furrow, Walmart's senior director of sustainability for food. "Whereas we have historically been known for price and assortment, responsibility is right in there now, and when you start to unpack that it has become the new definition of quality."
That wasn't always the case. In late 2005, when Walmart first got serious about sustainability, it was about the company's license to operate, brand reputation and stakeholder feedback, according to Furrow. The new sustainability agenda, with a new set of ambitious goals around renewable energy, employee development, locally grown produce and ingredient transparency, is designed to resonate with millennial consumers.
"In the past, there was a view that that consumers don't make decisions on sustainability, but rather price, but that is changing," says Furrow, whose role involves integrating sustainability into merchandising and sourcing. "[Millennials] are interested in what we are doing with energy and waste, but they want to see sustainability show up in their products, and they are looking at us for how to deliver that for them."
That's where the MRCC comes in. The group supports various organizations' 2025 goals to reduce by
20 percent nitrogen loading from Illinois, Iowa, and Nebraska. This will help meet the Gulf of Mexico Hypoxia Task Force's agreed-upon goal of 45 percent reduction in nitrogen and phosphorus loading, and ensure that 50 percent of all irrigation units used in Nebraska will maximize water conservation to reduce pressure on the Ogallala Aquifer. Longer-term, the goal is for Illinois, Iowa and Nebraska to have met the 45 percent nutrient loss reduction goal with the establishment of partnerships and goals expanded across the Upper Mississippi River Basin.
"The data shows us that for the first time ever, we are seeing responsibility as being core to our brand."
A RACE TO THE TOP
Variables related to soil conservation are the type of things that could show up on scorecards now in widespread use at Walmart. According to Furrow, the retailer has already evaluated $135 billion worth of goods, and more than 250 buyers are using scorecards in their categories. The scorecards create accountability and a race to the top because "seeing your name on a scorecard next to competitors' drives action."
Whether it is at the behest of Walmart, another retailer or of their own volition, suppliers of all types are taking actions to achieve sustainability related goals. This fall, Hispanic foods supplier Goya Foods opened a 240,000-sq.-ft., state-of-the-art and sustainable production facility in Secaucus, N.J. The building's 3.7-acre rooftop is equipped with 6,552 solar panels that are capable of generating more than 70 percent of energy needs. The addition of rail service will eventually allow Goya to significantly reduce transportation costs, traffic congestion and fuel consumption. In addition to the sustainability benefits, the facility has six times the production capacity of a prior facility.
While retailers and trading partners are collaborating on reducing their environmental footprints, the federal government is playing an active role to foster collaboration on the food waste reduction front.
"It is a goal for the United States to reduce food waste and loss by 50 percent by 2030," says Cheryl Coleman, director of the Resource Conservation and Sustainability Division of the Environmental Protection Agency. "It is a very ambitious goal because food waste is the single largest waste stream in the U.S. The average American spends $370 a year on food they never eat."
That equates to nearly 220 pounds per person. There is no single action to move the needle on reducing such a huge amount, but again, collaboration and new initiatives can have a cumulative effect. For example, one trend involves the sale of less-than-perfect produce such as the brand called Misfits from Robinson Fresh.
"Misfits brings the consumer value and reduces food waste," says Hunter Winton, general manager at Robinson Fresh. "One of the benefits for retailers is they are able to make Misfits a destination spot and create a treasure hunt because the assortment varies based on seasonality."
Also playing a role in food waste reduction are efforts by suppliers who provide supply chain products and services to retailers and growers. For example, WestRock manufactures a product called the Meta Tray 8 that features mitered corners. The seemingly innocuous design modification has big supply-chain implications because the trays are stronger and use less material. The mitered corners create a channel for airflow when trays are stacked. With improved airflow, whether in a distribution center or trailer, there is more even ripening and temperature distribution and reduced waste.
Beyond how products are grown, manufactured, conserved and transported, suppliers are taking action to change how products are consumed as part of their triple bottom line agenda. This movement is especially evident with processed foods and confectionary companies that are changing formulas to reduce sodium or sugar, adjusting pack sizes and serving size recommendations amid charges their products contribute to obesity.
Other manufacturers have taken social responsibility matters a step further with efforts to practically discourage consumption of their products. This is especially evident with alcoholic beverage suppliers, who are among the most aggressive when it comes to social responsibility initiatives.
In that regard, Heineken USA broken new ground this year with an unconventional marketing campaign as one aspect of its larger corporate social responsibility program, "Brewing a Better World." The company's research showed that among millennials of legal drinking age, moderate drinking has become "the new cool." Motivated by self-awareness and control of self-image in the age of social media, Heineken research showed that three-fourths of millennials already limit the amount of alcohol they drink on the majority of nights out. Feeding into this view, the brewer launched its "moderate drinker wanted" campaign which put women at the center, showcasing in a light-hearted manner how they prefer men to drink in moderation.
Moderate consumption is an important aspect of Heineken's social responsibility effort, so much so that the company spent nearly 10 percent of its media budget on responsible consumption. That level was just shy of a goal of 10 percent that extends through 2018.
Whether it is consumption or some other point in the supply chain, the future promises greater collaboration among stakeholders and new types of initiatives as retailers and suppliers look to deliver on the triple bottom line.